Remodeling companies prepare for unstable future

Remodeling work, like much of the construction industry, is not as robust as it once was.

While residential remodelers in this part of the country are not feeling the same pinch as their counterparts in new construction - yet - the squeeze could intensify in the future.

The latest Remodeling Market Index from the National Association of Home Builders was 52.9 in the Midwest in the second quarter, up more than eight points from the first quarter; any number above 50 indicates that remodelers view market conditions as improving. The national index was 41.8.

Local remodelers say most of their residential customers are choosing to renovate their homes for two reasons: to prepare for future resale and improve energy efficiency.

"There are a lot of maintenance issues - people are trying to make things more energy efficient, by caulking (and) adding insulation in attics," said Scott Bracy of Steward Construction. "People are also doing a lot of new windows. With gas prices and the economy, people are tightening up, and that's what pushes remodels."

The most popular projects for Bracy are the staples - in addition to energy efficiency, he's working on kitchen and bath remodels as well as exterior landscaping. Most of those projects, he said, are for people who have decided to stay put for a while - giving them the added benefit of being able to enjoy the improvements.

"I've seen many people remodel and then put (their home) on the market and sell it within a month, and they wonder, 'Why didn't I do this years ago?'" Bracy said. "Now people are saying, 'Let's spend a little bit now, enjoy the place for a year or two, and then we can look to sell it.'"

Cautious optimism

The story is similar at Sechler Remodeling, where owner Mark Sechler said customers are still coming to him with jobs of all sizes.

Sechler's concern, however, is for the future. He said his backlog is down considerably from what it was six months to a year ago, though he declined to give specific numbers.

"We're busy right now, but I'm concerned about how well it's going to continue," Sechler said. "I think everyone is concerned about that, because of the (financial) bailout and the doom and gloom everyone is talking about. You just have to be concerned that people are going to tighten up and not spend as much."

Those concerns may be well founded. While the Harvard Joint Center for Housing Studies reports that second-quarter improvements by homeowners were up 1.5 percent to $139.2 billion, the center predicts that numbers will be down 11 percent to $122 billion by first-quarter 2009.

"The slumping economy and struggling housing sector continues to drag down spending on home improvements," Nicolas P. Retsinas, director of the center, said in the report. "Households are reluctant to undertake major improvements in the context of falling prices."

While Bracy isn't as worried about future business, he does think the next few months will be somewhat tighter. The reason, he said, is the typical election-year uncertainty.

"Once we get through this election, everyone will be able to take a deep breath because they'll know where they stand," Bracy said. "It affects everyone in an election year, but especially with people worried about the economy."

The future

Shannon Lee, co-owner of Ozark-based Rock Solid Construction, isn't worried much about the market, either. He said his business - which gets about 85 percent of its work from remodeling projects - has been steady this year, though he declined to give specific numbers.

"We do small projects of $4,000 or $5,000 up to large projects of $200,000 or $300,000," Lee said. "We don't concentrate in any one particular area, so that has helped."

He added that many of his customers have signed up for work in recent months, in part, because of all the negative publicity surrounding the economy.

"We've had people come in with ideas - maybe they've talked to us two or three years ago at a home show - and they're coming in now and saying, 'We're tired of hearing all of this negativity. We're sick of it, and we're going to go ahead regardless of what we're hearing everywhere,'" Lee said. "You can talk about (a down economy) and it becomes reality at a certain point."

Trent Cowherd of Cowherd Construction said he has seen a decline in both new construction and remodeling work. Though he said that historically a slowdown in the economy means a pickup in remodeling as people invest their money in the relative safety of their homes, he said that doesn't seem to be the case now.

"Before, it was just that new homes were either expensive or not moving very much, so people would remodel. Now, they aren't spending their money on anything - they're sitting on it, waiting for better days," Cowherd said.

Growing competition

Remodelers should hope that work remains strong, because they also have new competitors joining the market. More than four-fifths of NAHB's remodeling index respondents said home builders in their areas have jumped into the remodeling sector because of the downturn in home construction. Only 109 singled-family housing permits have been filed in the city of Springfield through September, compared to 161 through the first nine months of 2007.

Cowherd said his company has historically shifted its focus between new construction and remodeling, depending on the market - and now is no exception, with the most potential business now on the remodeling side.

"As things have slowed down, we are more aggressively chasing after any referrals or phone calls we get on remodeling, bidding them a little bit tighter, and trying to get that going again," Cowherd said.

Bracy, Lee and Sechler - all members of the Springfield Home Builders Association's Remodelers Council - said that while there may be more companies in their line of work, they're not worried about having enough to do.

"If you've got a roof leaking or plumbing leaking, it doesn't matter how the economy is," Sechler said. "It's like your car; you have to have your car to get to work, no matter how much money it may cost (to get it fixed). If there's urgency - whether it be electric, plumbing or something else - you'll do it."