In a Recession, Small Remodels Keep Contractors Afloat
Deserts were once vast sea beds teeming, I imagine, with boundless plant life and creatures so massive and fantastic that our modern species can’t even grasp their strangeness. But now, deserts are deserts. They have dried up, and in place of ancient whales and seaweed forests, a much more diminutive ecosystem lives off what little moisture and sustenance remains. 
For contractors across the country, New Construction feels like a desert where steady work and profit have gone the way of the dodo.
In desert-like conditions, contractors are looking to small remodels to stay afloat. There’s little speculation in the building industry, but there are aging homes, low-cost materials and energy efficiency incentives, which are a ray of light in a trade otherwise rife with downsizing and bankruptcy protection.
A recent article in The Tennessean tells the story of Capitol Homes. The construction company was booming with everybody else for much of the last decade, building 850 homes in eight years, including a high-profile showcase on ABC’s Extreme Makeover: Home Edition. Now, things have changed. Owner David Luecke filed for bankruptcy protection and downsized his business to become a home remodeler. Where once Capitol Homes was banging out new home after new home, they are now refinishing basements.
I can relate to some extent. In 2007, when the boom started to wane, I was working with a friend and contractor in Grants Pass, Oregon, a town that soared and fell with the housing boom and bust as much as any town in America. In the span of a few months, his work portfolio changed from 90% new construction to 90% home remodeling, and the mentality of making big bucks turned to that of survival. It started with additions but soon came to include fencing, decks and other small projects. Occasionally, and thankfully, he fit in a new home here and there.
The point is that in times of tight belts and thin wallets, a remodel can be the difference between company malady and company maintenance. And while that may seem a dire choice given the successes of a few years ago, remodeling offers a unique opportunity that can carry a contractor until the housing market stabilizes. Remodeling is your potential lifeboat for a few simple reasons.
Cost of Materials is Low
There is a need for homeowners to remodel, and despite fears about money, a sharp drop in material costs is enough to overcome them. The cost of framing lumber has dropped 30% in the last four years to $254 per 1,000 feet. Granite countertops are now only 15% more expensive than Formica. Moving from building $1 million homes to less than $10,000 remodels is a big step down, there’s no denying that, but without fallen material costs, there might be no work at all.
Energy Efficiency
Another reason also stems from money. But this time, it’s about spending money now to save money (and the environment) later. Government incentives to encourage energy upgrades offer money back in the short-term, and heating, cooling and electricity over the long run are improving ROIs for homeowners and providing jobs for contractors.
Education is playing a key role in energy efficient remodeling. Homeowners are more aware of the environmental and financial consequences of their remodel. They know more and want to know even more yet about material life cycles, clean energy, passive solar design, recycled products and eco-friendly remodeling options. As a contractor vying for survival in the remodeling market, knowledge of green building can be a huge asset. New construction, when it recovers, will certainly come out of its slump with a greener tint, but for now it’s with remodels – basements, bathrooms, kitchens, windows and insulation – that contractors are maintaining some water flow in an otherwise dried-up desert.