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November 26, 2007
Housing Crunch is Less Painful in the Long View
I got a press release today from the National Association of Realtors that contained some good news on a couple of fronts. First, the NAR reports that the median price of existing houses for sale has actually risen in most of the markets they surveyed. And second, the value of existing homes is still holding up quite well when you look at the big picture. In other words, unless a homeowner bought at the peak of the housing bubble, he or she will still do just fine with appreciation over the long haul.
That doesn't make the current pain go away for builders, but it should offer some reassurance to people who bought a house in, say, 2004 or 2005. I fall into that group, and I was very glad to see my gut instinct validated. I'm not planning to sell my house for several years yet, so I'm pretty sure I'll recoup at least what I paid for it.
And it should help you remodelers out there reassure prospective clients, too. While they might not get the same payback in equity for a remodeling project that they could expect a couple of years ago, they're still making a good investment, especially if they plan to live in the house for a while. They'll get to enjoy the results of the project and get most of the money out of it when they finally do sell.
What are you hearing from your customers? Do they believe that their homes are still a great investment? Or are they hesitating to sink money into improvements?
Posted by Marjie O'Connor, HGTVPro.com Staff at 3:20 PM | Comments (3)
November 14, 2007
Builders Remodeling their Core Businesses
In the course of doing some research for Brian Bruce (site director for HGTVPro.com), I e-mailed some remodeler friends of mine and asked them if they're seeing much in the way of new-home builders turning to remodeling during the current slowdown. As it turns out, several of them have, but none of them seems to feel threatened. They have good reason, too. They're really good at what they do.
Remodeling is a very different animal from new construction (although many remodelers do both, particularly with custom homes). Every remodeling job is unique; there's no such thing as "production" remodeling. Remodelers have to use excellent trade contractors, since there are often peculiar situations created by previous "remuddling" projects or even from original construction. And, of course, the remodeler's own crew and the trades people are actually working in someone's home -- not an empty shell. They have to be able to interact effectively with the family and understand how disruptive remodeling is to their lives.
The remodelers I heard from also mentioned that new-home builders work on different margins. New construction is less labor-intensive, so lower margins work. But if they try to do remodeling at those same margins, they're going to lose money. Once they see the hit they're taking, they even may abandon a project halfway through, leaving the homeowners with a torn-up kitchen or bathroom and an urgent need to find someone to finish the work. Other builders just walk away from remodeling as soon as they realize just how different it is.
Have you had any experiences with this scenario? If you're a new-home builder who has diversified into remodeling, how are you dealing with the difference in margins? Or do you even find it to be a problem? Do you expect to stay in remodeling permanently?
If you're a remodeler, has your market been affected by builders moving into remodeling? How are you coping with the usually lower bids from these new competitors?
One thing's for sure: The industry is going through some changes. Let me know how it's panning out for you.
Posted by Marjie O'Connor, HGTVPro.com Staff at 12:34 PM | Comments (5)
