Construction Estimating Blog

On 7/1/2008 we uploaded the most recent pricing data. All subscribers should have received an email from RemodelMAX notifying them of this. Some of the pricing trends that RemodelMAX chose to highlight are as follows:

MATERIAL COSTS BEGIN TO SLOWLY RISE

• Plywood prices rebounded up 2% during the past quarter with lumber prices gaining 1%. Both still remain below 2007 levels.
• Gypsum wallboard declined 1%, leveling off at a record low.
• Steel costs are raising rapidly with some areas showing a double digit increase during the last quarter.
• Concrete prices remain steady matching 2007 prices.
• Asphalt roofing costs are on the increase as oil prices rapidly rise.
• Even with a continue drop in new construction activity, most material costs will show increases during the next quarter due to transportation costs rising in response to oil prices. Materials that utilize oil in their manufacture, such as roofing and asphalt, will suffer significant price increases.

RECOVERY ON HOLD UNTIL 2009
Source: Joint Center for Housing Studies
Source: REMODELING Magazine
Publication date: May 1, 2008

By Hayden Alfano

The latest release of the Leading Indicator for Remodeling Activity has even the most optimistic industry observers down on the market’s chances to bounce back soon.

The LIRA, published by the Joint Center for Housing Studies at Harvard University (JCHS), forecasts the size of the remodeling market four quarters out. The most recent data points to a 4.8% decrease in home improvement activity over the course of 2008.

In previous LIRA releases, JCHS officials had tended toward the conservative when it came to commenting on the immediate future. They minced no words this time around, however, a bad sign for those who had hoped for a quick rebound. “It looks unlikely that we will see any improvement in the remodeling market until 2009,” Kermit Baker, director of the Remodeling Futures program at JCHS, said in a press release. “Currently, the second half of this year is shaping up to be weaker than the first half.”

Nicolas P. Retsinas, director of JCHS, had a similarly bleak outlook. “Spending on home improvements continues to be sluggish,” he said, adding, “The fall-off in pending home sales suggests a long and slow recovery.

DO IT DIFFERENTLY
A changing market requires adjustments. What are you doing differently?

Source: REMODELING Magazine
Publication date: June 1, 2008

By Mark Richardson

By now, most of you recognize that the residential remodeling market is not what is was a few years ago. I also think you know why. The more important issue is what you are doing about it.

As I speak to remodelers all over the country, I find that most of them are not doing anything at least not anything different from what they did in boom times. They are talking a lot about the lousy state of affairs, but they are playing the game almost exactly as they did in the past. No one has a crystal ball, but all the indicators show that for the rest of the year, things may get worse before they get better. It’s a market that will put many companies out of business unless they adjust.

Just as remodeling in the cold and snow of winter requires a different approach from doing the same job in the heat and humidity of summer, a down market requires a different approach from what we have all been used to.

Put the following ideas into action or use them to jump-start your own thinking. Depending on how soon and how well you adjust, they might help see you through the next year or two. They might even straighten out some bad habits that may have developed during the remodeling frenzy.

Sell down, not up. In this market, prospects will still call you for projects that will grow beyond their budget. Instead of relying on the clients to stretch their budget, make sure they proceed with some fraction of the original scope. Once the project is under way, their confidence will build and their emotional attachment will grow, and you may be able to Introduce additional components that make sense. In the worst case, you have at least gotten a potential “do nothing” client to do something.

Sell risk. Your prospects may not mention risk, but the topic is whirling around in their heads as they make the decision to proceed. Weave this into your discussions early. You might point to projects that are less economically risky to tackle, such as repairs, kitchens, and bathrooms. Name-brand products create confidence and may make the project feel less risky. Steer homeowners who want to tackle some of the work themselves to those parts of the project that they can confidently handle. Being cooperative and encouraging will allay their fears and lead them to a decision to proceed.

Focus on past clients. Lead flow is a good indicator of market change. These days, as the number of leads heads downward and the cost-per-lead climbs upward, and past marketing methods fail to perform as expected, the most predictable source of new business is past clients. Don’t assume that a past client is a client for life. Homeowners today treat remodelers much like retail stores. They may
regularly frequent Macy’s out of convenience, but if Bloomingdale’s does something to attract them, they’ll switch in a heartbeat.

CLIENT ADDICTION

In this market, you must create more than just happy, satisfied clients. You need clients who are addicted to you, who are vested in your success, who will do everything they can to create new business for you.

Creating this kind of client is not something you can accomplish overnight. It’s a total team sport that is tied to a mindset not just a single set of actions. But what you can do right now is to embrace the concept that your client base is a valuable resource that can create predictable results in an otherwise tough and unpredictable market.

Again, I provide these ideas to get you thinking. What are you going to do differently during the next year? Are you willing to see the gains you made over the last five years vaporize? How might smaller returns affect key team members? Will you risk losing them?

Market conditions like these can be difficult, but they can also be times when opportunities hatch. They can help you regroup and get better and stronger. They are times when you can work to position your company to blast to new heights when the environment improves.

Mark Richardson is president of Case Design/Remodeling Inc.; mrichardson@casedesign.com.

On 4/1/2008 we uploaded the most recent pricing data. All subscribers should have received an email from RemodelMAX notifying them of this. Some of the pricing trends that RemodelMAX chose to highlight are as follows:

1st Quarter Material Trends

• Concrete prices have fallen since last December’s peak.
• Gypsum gained 2% during the last 2 months, but prices remain extremely low.
• Plywood and lumber continued a slow decline in price during the 1st quarter.

Remodeling Activity Projected to Remain Sluggish
Harvard’s Joint Center for Housing Studies

CAMBRIDGE, MA – Tighter credit standards and falling consumer confidence are expected to depress remodeling spending through 2008 according to Harvard’s Joint Center for Housing Studies. The Leading Indicator for Remodeling Activity (LIRA) reports that homeowner spending for home improvement activity will continue to decline, falling by an annual rate of 2.6% through the third quarter of 2008.

“Fewer home sales and falling home prices are dampening interest in spending on home improvements,” notes Nicolas P. Retsinas, director of the Joint Center for Housing Studies. “While remodeling expenditures are likely to continue to slump in 2008, there will remain a need for basic home improvements for an aging housing stock.”

“An expanding economy has helped cushion the remodeling market,” remarks Kermit Baker, director of the Remodeling Futures Program of the Joint Center. “Absent a more serious national downturn, remodeling activity is expected to see only modest declines in 2008.”

Foundations for Future Growth in the Remodeling Industry is available at www.jchs.harvard.edu 

Remodeling Activity Declines Slightly
National Association of Home Builder’s

Remodeling activity showed pressure from the housing downturn during the fourth quarter of 2007, according to the National Association of Home Builder’s (NAHB) Remodeling Market Index (RMI). The current market conditions indicator decreased to 40.9 from 46.2 in the third quarter. And the future expectations measure declined to 37.9 from 43.3 in the previous quarter.

The RMI measures remodeler perceptions of market demand for current and future residential remodeling projects. Any number over 50 indicates that the majority of remodelers view the market conditions as improving.

“While the housing downturn has impacted the remodeling market to some degree, it is on a much smaller scale than the rest of the market” said NAHB Remodelers Chairman Mike Nagel, CGR, CAPS, a remodeler from Chicago. “Home owners realize the importance of maintaining their property and making necessary repairs to support the value of their homes, so we expect this type of work to start to pick up again.”

Nationally, the RMI components for major additions and alterations during the fourth quarter declined to 42.28 (from 46.89). Minor additions and alterations also decreased to 41.76 (from 47.07) except for an increase in the South region to 49.81 (from 43.68). Maintenance and repair remodeling work declined to 38.11 in the fourth quarter (from 44.31).

“The decline in the remodeling market is far less than in the new home market and generally consistent with our remodeling forecast,” said NAHB Chief Economist David Seiders.

The RMI “special questions” section during the fourth quarter asked remodelers about business conditions during 2007 and their expectations for the entire year of 2008. Forty-three percent of respondents reported an increase in billing in 2007, while 25 percent reported that billing stayed at the same level as in 2006. With respect to 2008, 51 percent predict a dollar volume increase and 27 percent predict maintaining the same volume for the entire year. These results suggest that while remodelers see slower conditions in their business during the short term, the long-term prospects look good with a remodeling market recovery by the end of 2008.

For more information visit www.nahb.org/remodel

We need your help! With your feedback we were able to make v2.0 a huge success. Now it’s time to start thinking about the next release. Since we opened for business in 2004 we’ve released four versions of our software. Each release has come with new useful features suggested by YOU, our users. It wasn’t long ago that you couldn’t print out a table summary of your project, duplicate a project, or integrate with QuickBooks Pro. Those were all features requested by our users. You mentioned it would be convenient to use information from a respected nationally maintained database, so we linked to RemodelMAX.

Would you like the ability to search for parts? A wider part view in the Project Manager? Part of what our company so unique is that we are a relatively small organization. This means that we are very adaptable and give a lot of weight to the opinion of each of our customers; we invite you to play a role in our product development. Please post a comment below with suggestions for our next release and help us build a better product!

On 1/2/2008 we uploaded the first quarter material pricing data. All subscribers should have received an email from RemodelMAX notifying them of this. Some of the pricing trends that RemodelMAX chose to highlight are as follows:

• Drywall prices continue to drop due to lack of demand in the new housing sector, sinking 17% this year.
• Common dimensional lumber prices have been stable with a modest rise during the summer ending the year with no increase.
• Studs finished the year with pricing 5% below last year.
• Plywood prices tumbled during the 4th quarter, climbing just over 2% during the year.
• Concrete prices have remained steady during most of the past quarter, having increased over 5% during the year.

Also, the 12/17/07 Forecast for Material Pricing from the Engineering News-Record was cited:

The housing market is projected to continue its decline during 2008. Lumber and cement prices are forecast to remain flat while plywood may drop 5% in price. The bottom for drywall is not in sight yet with a 20% decline in price projected for 2008.

Harvard’s Joint Center for Housing Studies new report, Foundations for Future Growth in the Remodeling Industry, identifies key sources of future growth in the remodeling industry.

From the JCHS Housing Review Spring 2007

Over the last decade, the U.S. home improvement market nearly doubled in size, reaching a new high of $280 billion in 2005. After years of exceptional growth, the remodeling sector has returned to a more sustainable pace. Under investment in the owner-occupied and rental stock, a growing desire for energy-efficient retrofits, continued strength in high-end discretionary improvements, and projected increases in both the number of homeowners and per household expenditures ensures solid growth in remodeling activity in the years ahead.

Homeowner spending on remodeling is expected to increase at an inflation adjusted compound annual rate of 3.7 percent between 2005 and 2015, generating 43.6 percent growth for the decade. Also, with new construction slowing from its record pace and improvement and maintenance activity strengthening, the remodeling share of residential investment is expected to reach a new high of 47.0 percent by 2015.

In recent years, home improvement expenditures have become concentrated at the high-end, with almost a third of spending on upper-end discretionary projects by 2005, up from only a fifth in 1995. In 2004-2005, the top five percent of households spending the most for home improvements accounted for 61 percent of all remodeling expenditures, up from 45 percent a decade ago. Though spending on high-end discretionary improvements will continue to lead overall growth, several other economic and demographic forces are currently in place that will ensure favorable and more balanced growth in remodeling activity in the coming years.

In the short run, the aging housing stock, rising demand for energy-efficient retrofits, a strengthening market for high-end rentals and the rapidly rising number of senior, minority and non-family homeowners will all support sustained growth in replacements and system upgrades. With the slowdown in the housing market, homeowners are finding that in many cases mid-range versions of projects now have a better payoff than upscale versions. Furthermore, much of the housing stock, including homes all across the price spectrum, has had only modest improvements in recent years, and these under invested homes are now prime targets for replacements, upgrades and discretionary projects.

Foundations for Future Growth in the Remodeling Industry is available at www.jchs.harvard.edu

Click here to watch video demonstration! 

Google has built a web application that will allow you to create, save, edit, and share spreadsheets within your web browser. This is much more than a convenient development; what this suggests is that Google acknowledges the increasing demand to shift technology from our computers’ hard drives to web hosts and that they would like to be the forerunner in providing us with this rapidly expanding technology.

In software engineering, a web application is an application delivered to users from a web server over a network such as the World Wide Web or an intranet. Web applications are popular due to the ubiquity of the web browser as a client, sometimes called a thin client. The ability to update and maintain web applications without distributing and installing software on potentially thousands of client computers is a key reason for their popularity. … for more: http://en.wikipedia.org/wiki/WebApp

But without reflecting on what this means with regards to software trends, let’s look at what Google Spreadsheets mean to your business. Here are the pros and cons of developing your spreadsheets online:

Pros:

• You don’t need software! This is a free “Web App”, so the program is run from a web server, not your computer.
• The files can be accessed from any computer. All you need is a web browser with access to the Internet. That means you could start creating a bid on your Google spreadsheet at your office, continue working on it from your home computer, then edit it if necessary on site with your client.
• You can choose who can access and who can edit the spreadsheet. Multiple people can even work on the spreadsheet simultaneously from remote locations!
• You can start your spreadsheet from scratch or upload data from a XLS (Excel) or CSV (Comma Separated Value) file.

Cons:

• The processing speed of entering data into the spreadsheet is limited to the speed of your Internet connection. Your CPU can still take your high-speed modem in head-to-head competition, but this will likely be less of a factor in the future. If you’re still using a modem, Google spreadsheets may get frustrating.
• Although you can implement an impressive collection of formulae, the application isn’t as diverse and powerful as software like Excel, so there are some limitations, particularly if you’re an advanced user.
• You’re required to create a gmail account (free).

-Nolan Orfield

To address this question it’s easiest to look at estimating from a historical perspective: Once upon a time, every contractor created estimates by hand. He/she would pull out a pad of paper and pencil, jot down some figures line by line, then sum up each item to achieve the estimate. This was a simple and effective way to create a bid, but human error, inflexibility, and time consumption left plenty of room for improvement.

With the advent of computers, anybody with an ounce of technical savvy immediately recognized the benefit of using spreadsheets; it’s faster, making changes is easy, and computers are great at math! Evidently the term “spreadsheet” at one point (before my time) referred to a physical sheet of paper in which data was laid out in a grid format. These days when someone refers to a “spreadsheet” they are most likely referring a type of file created in programs like Microsoft Excel. Data is still laid out in rows and columns as in the paper variety, but the capability to integrate formulae and build relationships between the “cells” (the box where a row and column meet) make electronic spreadsheets much more powerful and MUCH more useful. While this is a big step up from doing things by hand, spreadsheets still have their limitations: Making changes that will apply to an entire document can be tricky, tracking change-orders can be challenging, and the flexibility that only spreadsheets can offer also means a lot can go wrong in the hands of someone inexperienced with the technology. Additionally, those with good attention to detail will add so many line items that the spreadsheet quickly becomes aggravatingly long and cumbersome. For these reasons, it is oftentimes best to work with the next technological “step up,” a database.

It sounds intimidating, I know. If spreadsheets can be difficult to use, how in the world are you supposed to learn how to build a database? A number of contractors have successfully developed customized Microsoft Access database-based applications but, unless you have a Ph. D. in computer science, taking this route probably isn’t worthwhile. Good news: A number of companies (such as Clear Estimates, Inc, of course) have already taken care of this for you! Database-based programs are more powerful than spreadsheets because they utilize one centralized location (the “database”) that contains multiple tables full of data that are all linked and interdependent. As complicated as this sounds, a well-designed database-based system is very easy to use; these programs ideally utilize nice looking “graphical user interfaces” (pretty screens) that present the data in convenient and easy-to-understand formats, as opposed to spreadsheets that put you face-to-face with the raw data. Not only are these programs easier to use and more powerful, but they also have the potential to incorporate additional features like integration with QuickBooks, generation of various reports, scheduling, and other things that are difficult or impossible using a spreadsheet.

So which method is the best? It depends on your style and your company. The trend has been to adopt more sophisticated database-based methods, but what it ultimately comes down to is finding a system that is robust, flexible, and can be set up to mimic your estimating style. These days there’s no excuse for doing things by hand. A plethora of options exist in estimating software, database and spreadsheet-based alike, so there’s no reason you can’t set up a system to work well for your company.

-Nolan Orfield�

On 10/1/2007 we uploaded the fourth quarter material pricing data. All subscribers should have received an email from RemodelMAX notifying them of this. Some of the pricing trends that RemodelMAX chose to highlight are as follows:

The housing slowdown does have some benefits:

• Drywall prices continue to drop due to lack of demand in the new housing sector, dropping 8% this year.
• Dimensional lumber and wood stud prices are down slightly in most areas, leveling off at 8% below 2006 prices.
• Plywood price increases have slowed, climbing only 4% this year.
• Concrete prices remain steady with slight declines in a few areas, leaving prices at only 5% above 2006 levels.

Also, the 7/19/07 press release from Harvard’s Joint Center for Housing Studies Leading Indicator for Remodeling Activity (LIRA)was cited:

Remodeling Growth to Remain Slow but Steady
According to Leading Indicator for Home Improvement Activity

CAMBRIDGE, MA – Even with the recent weakness in house prices and consumer confidence, growth in home improvement expenditures will hold stable in the low single digit range according to the leading indicator developed by Harvard’s Joint Center for Housing Studies. According to the Leading Indicator for Remodeling Activity (LIRA), which builds on the Remodeling Activity Indicator that the Joint Center has been releasing since 1998, homeowner spending for home improvement activity will essentially remain constant through the first quarter of 2008. Overall growth in spending for 2007 is projected to be 3.0%.

“Homeowners continue to draw on built-up equity in their homes to finance home improvements,” explains Nicolas P. Retsinas, director of the Joint Center for Housing Studies. “However, the pace of spending remains moderate and tempered in the context of a very soft housing market.”

SOURCE: Harvard’s Joint Center for Housing Studies Leading Indicator for Remodeling Activity

Welcome to our new blog about Construction Estimating. My name is Nolan Orfield and I am one of the co-founders of Clear Estimates, Inc. We believe that it is essential to “keep a pulse” on the opinions of our customers; in fact nearly all revisions made to the program in its last three releases were driven by feedback from Clear Estimates users. I hope this will become a place to share ideas, talk about technology trends in the construction industry, and discuss ways to improve our software. So don’t be shy! Please let us know how you feel and post comments.