A recent Money Magazine article put an apt spin on today’s remodeling market. First the good news, the cost of materials are falling rapidly and bringing down the cost of remodels themselves. This bodes well in that homeowners, who may not be able to sell their house in the present market, can at least get the best price on those much-needed renovations they’ve been putting off. This could mean some work for contractors yet. And a good selling point for convincing on-the-fence homeowners to go for that remodel now rather than later.

But there are two big downsides. One, the pool of contractors looking for work is growing steadily and driving down prices further. Two, that means profit margins are slimmer and contractors who get the go ahead may have to do more work for less money.

But it is work.

While the article in Money Magazine is geared toward homeowners, there are some important lessons for contractors as well. Mainly getting to know the homeowner in today’s market. Even those with the means to put on a new roof or expand the master bedroom are thinking twice about it. For a few reasons:

• the return on investment is at a low point in the current housing market
• the future is incredibly uncertain

Fortunately, however, there are more reasons why homeowners who can, should remodel:

• material costs are falling fast (especially for oil-based products such as vinyl, asphalt)
• smaller, necessary “fix-ups” still need to be done
• increased competition means lower prices, more concessions
• putting money into the home now, while costs are low, will help the home maintain its value

Still, it’s a very touchy game on all sides. Contractors desperately need work, homeowners still need or want upgrades, but the housing market is not finished declining. It is therefore very important that homeowners understand which projects will have the best return on their investment and will likely be meticulous about choosing a project and a contractor, as the Money article itself encourages. (more…)