By Kelli B. Grant
No longer content with new cabinet pulls or a fresh coat of
paint, homeowners are beginning, again, to dabble in home remodeling projects.
Poggenpohl
Poggenpohl kitchens (ARTESIO Walnut)
Contractors say they’re getting more requests for upgraded kitchens and
bathrooms, as well as home additions and major improvements that cut energy
bills and reinforce structures against storms. It’s a significant shift from
recent years, when homeowners were focused on only vital home repairs,
“preserving the investment you had,” says Steve Melman, the director of economic
services for the National Association of Home Builders. The NAHB’s forecast
expects a 2.4% increase in remodeling spending this year among
single-family-home owners. Harvard University’s Joint Center for Housing Studies
has a rosier outlook. Residential spending on additions, remodels and other
major home improvements for October 2012 through September 2013 is expected to
tally $145.5 billion, up 19.6% year over year, according to a January report.
Even as remodeling rebounds, however, consumers are looking for ways to save.
Prerecession-style, “blowout” renovations like creating a master bedroom suite
or multiroom home addition pushed the average remodel tab to between $250,000
and $350,000, says Justin Mihalik, the second vice president of the New Jersey
chapter of the American Institute of Architects. Today, the average for bigger
projects runs about $100,000 to $150,000, he says — and many people are spending
far less. Four trends that are reshaping remodeling:
Cash Beats Credit
Homeowners are largely capping the budget at whatever they’ve saved up.
That’s because financing isn’t as readily available as it was during the last
remodeling boom — nor can people easily wrap the costs in when refinancing a
mortgage, says Bill Shaw, chair of the NAHB’s Remodeler Council and owner of
Houston-based firm William Shaw & Associates. Not only has paying in cash
led to less expensive projects; it has also fueled the trend of mini remodels,
where homeowners tackle, say, just the kitchen cabinets, with the intention of
getting new appliances or flooring later, says Sean Murphy, DIY expert for home
improvement retailer Build.com. “It’s easier on the wallet,” he says. But
consumers should still plan out the whole project in advance, to avoid extra
work and costs down the line from elements that don’t match up, such as new
cabinets that won’t fit the new, bigger fridge.
Livability, Not Resale Value
Unlike in boom times (or during the “house-flipping” craze), there’s less
focus now on the added value a remodel might bring at sale. For virtually every
residential remodeling project, “if you sell within a few years, you’re not
going to recoup 100% of the cost of that project,” says Melman. According to
Remodeling Magazine’s 2013 Cost vs. Value Report, the typical recoup is just
60.6%. That’s up nearly three points from 2012 — and represents the first
increase since 2005. With more consumers thinking about long-term livability,
experts are getting more requests for smaller-ticket projects that don’t
typically add value at sale anyway, such as mudrooms, innovative kitchen storage
and outdoor spaces. Older adults who have rethought selling have also created a
bigger market for aging-in-place renovations such as grab bars, step-free
showers and even elevators, says Tom O’Grady, chair of the National Association
of the Remodeling Industry’s strategic planning and research committee and owner
of Drexel Hill, Pa.-based O’Grady Builders.
Practical Upgrades
Premium prices for energy- or water-saving appliances and fixtures have come
down over the years, making those upgrades more attractive for long-term-minded
homeowners. Annual savings for a low-flow or dual-flush toilet average $50; a
water-conserving faucet, $220, says Murphy. Energy-efficient roofs, siding,
windows and doors are equally popular projects, says Mihalik. (Currently,
homeowners can claim a credit for 10% of the cost, up to $500 total, of
qualified projects, including insulation, water heaters or roofs. Projects must
have been completed during 2012 or 2013. Find details at Energystar.gov ( energystar.gov
). Storm-proofing upgrades, such as wind-resistant roofing, built-in
generators and basement drainage, have also gained traction. “It’s exploded
since Hurricane Irene in 2011,” Mihalik says. The hope, he adds, is that the
investment will help homeowners avoid or limit damage in future years, and maybe
cut their insurance bills. But even consumers who aren’t specifically looking
for energy-efficiency or storm-proofing may find they need to budget for them.
Depending on where you live, upgraded building codes now often require some such
features.
Casting a Wide Net
Luxury real-estate agent's blockbuster sales
Alyssa Abkowitz joins Lunch Break with a look at brokers who make only a
couple of sales a year — but they earn them a year's salary. Photo: Steve
Mundinger.
During the fourth quarter of 2012, remodelers reported a 3.9% increase in
inquiries over the previous quarter, according to the NARI. But the number of
bids that turned into actual jobs was slightly behind, up 3.5%. “It’s taking
much longer to close a sale,” says Shaw. Where boomers might talk to two or
three contractors at most, younger couples are meetings with at least twice as
many. Recently, Shaw says, he met with a homeowner who had initially reached out
to 20 contractors before soliciting bids from seven. “That’s unheard of in
previous years,” he says. Experts say plenty of contractors left the industry
during the downturn, but work is still limited enough that it’s worth the effort
to shop around and get multiple bids. Homeowners’ best bet is still referrals
from friends or family who have had work done, says O’Grady. “In the downturn,
we lost an awful lot of remodelers that didn’t use the best business practices,”
he says. “Anybody that’s low-balling a number today? Either they don’t know
their costs or they’re going to come back with a tremendous number of change
orders.”
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