Fourth Quarter Price Updates Released

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On 10/4/2011 we uploaded the most recent pricing data. All subscribers should have received a notification email from RemodelMAX. Some of the pricing trends that RemodelMAX chose to highlight are as follows:

ROOFING AND LUMBER COSTS GO UP ACROSS THE COUNTRY

  • Dimensional lumber costs go up 5-10% around the country.
  • Plywood costs go up 5-10% in most areas.
  • Roofing costs increase again by 5-10%.
  • Drywall costs continue to stay low with minor increases in some areas.
  • Insulation costs fall 2-5% in most areas with minor increases in some areas.

Here are a couple of insightful articles:
Kitchens, bathrooms top projects as homeowners look for more bang for their buck

By Jonathan Sweet, Editor in Chief
Professional Remodeler

August 26, 2011

Even as many remodelers continue to see a move toward smaller, need-based projects, some are starting to see prices increase again.

That’s according to the latest Professional Remodeler research, which found the shift to smaller projects that started a few years ago continues. Still, some remodelers are experiencing a nascent recovery.

“A year ago it was all price shoppers. Currently, people are looking more for people that they trust,” said a Wisconsin design/build remodeler. “If you do a good job and are reliable it works in your favor.”

It may not be 2005, but it’s also not 2009. For the first time since 2007, less than half of remodelers said their average job price has declined from a year ago, with only 45 percent reporting project size is down. That compares to 75 percent last year who reported a drop in the previous 12 months. Only 13 percent said prices had dropped more than 25 percent, compared to 32 percent who said that last year.

Still, there are challenges, many remodelers said.

“Projects are much smaller, budgets are tight, most jobs are no-frills,” said a New York design/build remodeler.

Clients are “looking at smaller projects for fear that the value of the home might decrease further so they are holding off slightly,” said a full-service remodeler in Pennsylvania.

While only 22 percent of remodelers said their average project price was increasing, that’s far better than the 8 percent that said the same last year. A third of remodelers reported no significant change in their average project price in this year’s survey.

Almost 40 percent of remodelers said their average project falls under $25,000, with about 55 percent reporting an average price of less than $50,000. Big jobs haven’t disappeared, though: 32 percent said their average remodeling project was more than $100,000 and 16 percent said it was more than $200,000.

There’s no better example of the change in the market than the shift in project type. Kitchens continue to be the top project for many remodelers as they have been in the past, even as the scale of those kitchen re-dos declines.

However, from 2004 to 2008, whole-house remodels and additions were the next most popular projects as homeowners took advantage of skyrocketing home prices and easy money to undertake massive projects. For the last three years, though, those projects have been passed up by handyman work and exterior remodeling.

“People are much more apprehensive about investing in their homes because they’re not seeing a return,” said a California design/build remodeler. “Remodeling has shifted to home maintenance and repairs.”

Consumer confidence still biggest obstacle
A general lack of consumer confidence continues to be the most important reason homeowners are choosing not to remodel or to reduce their project scope.

“Everyone is very hesitant and unsure,” said a New York full-service remodeler.

Sixty-eight percent of respondents cited consumer confidence as a challenge (see chart below), and 52 percent said it was the top cause of a decrease in project size. Declining home values was a distant second, with 36 percent of remodelers saying it was one of the reasons behind declining prices and 18 percent picking it as the top cause.

“There’s a lack of confidence in maintained value,” said one remodeler and custom builder. “High-end clients are not willing to invest with diminished returns.”

Financing challenges was picked as one cause by 33 percent, with 10 percent saying it was the No. 1 reason.

“Most clients are working with cash now since most homes are underwater and cannot be borrowed against,” said a Florida remodeler.

Financing challenges were the only obstacle to see a marked decline from 2010, when 51 percent cited it as a major cause of smaller projects.

For those remodelers who have seen their average project increase in price, the top reasons were increasing consumer confidence and marketing to higher-end clients.

Finally, many remodelers reported a decrease in business because of the expiration of the energy-retrofit tax credits included in the stimulus package in 2009. The $1,500 credits on windows and other upgrades helped many remodelers sell projects the last two years. (64 percent of remodelers said it was impacting clients’ remodeling decisions in a previous Professional Remodeler survey.)

While 60 percent of those we surveyed said there was no impact, 34 percent said the expiration has hurt business.

 
Homeowners Shelve Remodeling Plans Over Economic Fears

By Sheryl Nance-Nash, Daily Finance

Too scared to spend amid so much economic uncertainty, homeowners are just saying no — to remodeling. According to Remodelormove.com, the number of homeowners who say that the economy has them shying away from renovations jumped from 69% in the spring to 80% now.

Financial analysis company Sageworks has found remodeling contractors reporting their business is down 3.81% over the last 12 months, a greater pace of decrease than was seen in 2009, when we were in the throes of the recession, says spokeswoman Melinda Crump.

“The fall 2011 U.S. Remodeling Sentiment Report shows that after a year of stabilization in 2010, the unrelenting bad news about the economy this summer is driving many homeowners to reconsider and either delay or scale back their remodeling plans,” said Dan Fritschen, founder of Remodelormove.com, in a prepared statement.

The strong pullback was unexpected, Fritschen told DailyFinance. “A year ago, I wouldn’t have thought that this is where we would be today. I was surprised by the strong reaction.”

Cynthia Ponce of Ponce Construction has seen firsthand homeowners cringing at the thought of ponying up cash right now. “We’re a pool and landscape contractor in Southern California, and have been in business for over 24 years,” she says. “Lately, we’ve been given the excuse of ‘Your pricing is great, and your work is awesome, but we just want to wait a few months and see what the economy is going to do. We will give you a call, or you give us a call in about three or four months.’ ”

“There are quite a few people who still have money, but they’re scared to spend it right now and just want to wait and see what happens,” says Ponce.

But the continued high unemployment and stock market woes fuel fear.

Another clue as to how leery folks are — those who are going ahead plan to go cheap. Nearly 80% of those who will remodel say they plan to use “economy” materials, compared to 68% who said that at the beginning of this year. And with DIY a perennial money-saving technique, 62% said they planned to do some of the work themselves.

John Boyd of Ridgefield, Conn., had planned to remodel his kitchen and master bath, and then move, but decided not to
because of the recession. “I’ve done some repainting and other improvements that I can handle without a lot of money,” says Boyd. “It’s a nice house and a lovely area, but we’d like to shorten the commute to New York. We still want to move but who knows when the house will sell, so we might rent the house.”

Robert Donaldson, on the other hand, couldn’t wait for the economy to improve because his renovations were more urgent. “As our family grew, our house had to be renovated. I would estimate that the renovations for the rooms was around $7,000; my wife and I saved up money to afford the renovations,” says Donaldson, of Lakewood, Ohio.

“We felt comfortable with the amount we spent on the renovations for a couple of reasons. First, we know that the money spent on renovating the house would improve the performance, aesthetics and resale value of the house. Secondly, we knew that this would be our only window of opportunity to undertake these renovations until our kids were grown and off to college. There are no regrets whatsoever in undertaking and spending money on the renovations to our home. Having finished and comfortable living spaces for our children to enjoy outweighs any regrets.” says Donaldson.

There is an upside for renovating now, says Remodelormove.com’s Fritschen: “Materials are less expensive, some 20% to 30% less, without sacrificing quality.”

Just because the wider economy is uncertain doesn’t mean waiting is necessarily your best move, he suggests. “Look at your situation. If you’re confident about your income stream and you want to make changes that will improve your home, its value and your lifestyle, then remodeling is a good investment, especially compared to what you can get in a savings account right now.”

 

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