Slow building recovery means it's a good time to remodelby Martin Moylan, Minnesota Public Radio
ST. PAUL, Minn. — Peg Wangensteen and her husband, Doug, had been in their St. Paul home for about 40 years when a number of things inspired them to remodel their upstairs bathroom this spring.
"One was our granddaughter saying to us, 'Grandma why do you have paint peeling off the ceiling of your bathroom,'" she said. "But it was also that the water pressure wasn't as good. It was the room was kind of cool because it had two outside walls."
Workers gutted the bathroom to the studs and installed new insulation, sheetrock and tile. They also replaced aging pipes, along with the bathroom window, sink, toilet and tub.
It was a significant expense but the Wangensteens think they received a good deal, saving about $1,000.
"We thought the bids were going to be better than they might be in a few years from now," she said. "We have a sense that there isn't as much remodeling going on and that people want the work. We were hoping to tap into that."
As more homeowners undertake such projects, the hard-hit construction industry appears to be recovering slowly -- improvement is starting to show up in the remodeling business.
But times are still tough in the building trades. These days there's often intense competition for the remodeling work that is available. That's pushed down the cost of home renovations.
Many remodelers agree with Peg Wangensteen's read of the market.
"I would say that over the past couple of years, we've seen overall prices on project come down maybe 10 percent or so," said Loren Schirber, who owns Castle Building & Remodeling, which did the Wangensteens' bathroom renovation.
Given the cost of remodeling projects, 10 percent can translate to savings of thousands of dollars.
Schirber said that competition intensified as the economy slumped, putting pressure on the wages of electricians, plumbers, and other trades people, as well as prices of building materials and the profit margins of contractors.
"We have to work harder to find better suppliers and vendors, so, we can find a better value and make people's dollars stretch further," he said.
The competition is coming from unemployed and underemployed tradespeople striking out on their own. New home builders who entered the remodeling business after the collapse of new home construction have also pushed prices down, said Don Martin, a partner in J-Mar Builders & Remodelers.
"I do believe it's a buyer's market because there's still a fair amount of pressure to keep your prices down to get work," he said. "It's starting to turn a little bit. It definitely feels like the economy is changing. But I do think that there's still some pressure to keep your price down, just to keep the work coming in."
Martin said some of the pressure comes from workers willing to go without contractor's insurance coverage or building permits. He's also seen more people willing to work for cash under the table.
"I don't know if it's as prevalent today as it was six months ago," he said. "But I would say in the last year and half, it's probably been more prevalent than at any time since I've been in the business."
Martin said homeowners take a lot of risks by hiring unlicensed or uninsured people to do home improvement projects. Failing to obtain a permit for work can mean it won't be done right.
The Joint Center for Housing Studies at Harvard University estimates home improvement spending nationwide fell from $145 billion in 2006 to $115 billion in 2011, a decline of about 20 percent. But the center forecasts a 6 percent increase in home fixup spending this year. Stronger pending home sales and low interest rates are expected to contribute to the rise.
But the amount of money homeowners are putting into each home renovation project has dropped considerably, according to BuildFax, which collects data on remodeling permits nationwide. "The average and median job cost on a permit has gone down by about 20 percent pre-recession versus post-recession," said Joe Emison, vice president of research at BuildFax.
Emison said the decline could be because projects are less ambitious or more favorably priced, or both. But he said the Twin Cites remodeling market seems to be on the upswing. Projects were up an estimated 13 percent in March.
"Year over year, we're seeing some pretty good growth in Minneapolis," he said.
If that growth continues, homeowners will likely have less room to negotiate deals with remodelers. Some contractors say the market has already turned, for them at least, and they're able to raise prices.
But officials at Hanley Wood Market Intelligence say the market still has a big hill to climb. The firm projects the Twin Cities market won't return to the peak levels of 2007 until late next year.
- Morning Edition, 05/07/2012, 8:25 a.m.