Economy, lack of confidence drive project choices

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Professional Remodeler research shows clients are changing what they choose to remodel and how they do it

January 01, 2010
Sidebars:

Methodology

Project Decisions: Remodelers' Trends

The weak economy is shrinking project sizes and dramatically changing the projects clients choose to do, according to the latest Professional Remodeler research.

More than 75 percent of remodelers have seen their average job price drop this year compared to their average from 2004 to 2008, with 11 percent seeing a drop of 50 percent or more (see chart opposite page). The majority of remodelers have seen a decrease of between 10 percent and 50 percent.

For those companies with more than $2 million in annual revenue, though, the outlook isn't nearly as bad. Only 5 percent of those companies reported job size dropped by more than 50 percent. In fact, half reported their job size had not decreased at all or had dropped less than 10 percent, with 16 percent actually reporting an increase in job size.

For those remodelers that had seen a decrease in job size, we asked them what was driving that. Consumer confidence was easily the No. 1 cause, with 70 percent of remodelers selecting it as one of the causes. More than 50 percent also said lack of financing was playing a role, while 38 percent cited decreasing home values and 34 percent noted higher unemployment. Twelve percent blamed other causes, including the government, unlicensed competition and the media.

 

Three-quarters of remodelers have seen their job size drop this year, with a third seeing a decrease of more than 25 percent.
More than 60 percent of remodelers say the energy-efficiency tax credits are influencing clients’ project decisions.

There were differences by region (see table p. 34). In the Northeast, Midwest and South, consumer confidence was easily the No. 1 cause for decreasing job size, but in the West, remodelers cited financing challenges. Decreasing home values, much less of a factor in other regions, was nearly as important as consumer confidence to Western remodelers. That's not surprising, considering the plunging prices in states such as Arizona, California and Nevada.

With some of the nation's highest unemployment rates, remodelers in the Midwest said that was the No. 2 challenge in their region, second only to consumer confidence, while companies in the South and Northeast saw financing as the No. 2 challenge.

Project mix changing

The types of projects that remodelers are doing compared to the previous five years have also shifted. Clearly, homeowners are opting for the repairs they need or projects that provide immediate relief, such as window replacement to lower energy bills.

Kitchens continue to be the top job type, but not to the extent they have been in the past; 29 percent of remodelers said it was their most popular project in 2009, compared with 39 percent in 2004 to 2008 who said it ranked there. After that, we see an even more dramatic shift. Bathrooms were the second-most popular project in 2009, chosen as the top project for 17 percent of remodelers, up from 5 percent from 2004 to 2008. Home repairs jumped from being the top project for barely 3 percent of remodelers the last five years to 16 percent for 2009.

Additions and whole-house remodels, with their larger price tags, also took a big hit this year. Nearly a quarter of remodelers said whole house remodels were their top project over the last five years; only 12 percent said that for this year. Additions, once the top project for 19 percent of companies, was such for only 9 percent of firms in 2009.

Exterior replacement projects, barely a factor for many companies during the boom years, also have seen great growth this year. While 77 percent of companies indicated it was one of their least popular project types from 2004 to 2008, 47 percent cited it as one of their top projects in 2009.

Besides representing more of a "need" than the typical remodel, exterior projects (especially window replacement) were probably also driven by the tax credits introduced as part of the stimulus early last year. Sixty-four percent of remodelers said the credits influenced their clients' choice of remodeling projects, although only 10 percent said it was a major influence.

Even with smaller, less complex projects, homeowners are taking longer to make remodeling decisions. Many remodelers said it was the biggest change in the way clients plan their projects (see sidebar.) Nearly 70 percent of remodelers reported that the time from initial client contact to signed contract has increased over the past year, with 40 percent saying it has increased significantly.

2009 2004–2008
Kitchens Kitchens
Bathrooms Whole House Remodels
Home repairs/handyman Additions
Exterior replacement Bathrooms
Additions Home repairs/handyman
Whole house remodels Exterior replacement
Decks/outdoor living Decks/outdoor living
SOURCE: PROFESSIONAL REMODELER SURVEY, NOVEMBER 2009

 

Northeast  
Consumer confidence 37%
Financing challenges 25%
Decreasing home values 17%
Higher unemployment 17%
Other 4%
Midwest  
Consumer confidence 36%
Higher unemployment 22%
Financing challenges 21%
Decreasing home values 16%
Other 5%
South  
Consumer confidence 39%
Financing challenges 25%
Decreasing home values 16%
Higher unemployment 10%
Other 10%
West  
Financing challenges 29%
Consumer confidence 25%
Decreasing home values 23%
Higher unemployment 17%
Other 6%


 

Methodology

401 remodelers completed the survey via the Internet from Nov. 18 to Nov. 30, 2009. Participants were chosen from a random sample of subscribers to Professional Remodeler magazine and Professional Remodeler e-newsletters.

Project Decisions: Remodelers' Trends

We asked remodelers to tell us the biggest changes they've seen in the way clients make project decisions. Here is some of what they had to say:

  • "Holding off as long as possible."
  • "They are looking into lowest costs and ignoring quality."
  • "Budget and energy are major concerns with less money to work with."
  • "Clients seem to do a lot more research on the Internet concerning products and procedures prior to initial contact. Many times this requires explanation of why our way is different from what they saw or read."
  • "More long-term contemplation. 'How is this going to increase the overall value of my home?'"
  • "High-end has slowed because most of the time the improvements are not needed, only a change that is wanted."
  • "Multiple bidders, low ball gets the job."
  • "They inform me at the first meeting that 'the number is the number' and there is zero tolerance for missing their budget number or going over."
  • "They shop price extensively, then many postpone the work to the future."
  • "They simply are not doing projects! And if there is planning, it's for down the road — next year at best."
  • "They are planning for staying more than fixing up to sell."
  • "We hold hands more and need to assure the client they are making the right choice in the project they choose to do and the materials they choose to use."
  • "They seem to want everything at half price."
  • "Clients want more for less (much less), comparing new construction or remodeling to buying a foreclosure."
  • "No planning. The only work we have is repairs that must be done."
  • "We need to substantiate everything in our quotes to prove the value to our customers."
  • "Cautious. Very cautious."

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