As indicators suggest another year before housing starts rebound, has the remodeling market seen a spike in activity? The walls and ceilings community seems divided on the answer.
Given the current reports of the subprime mortgage crisis,
housing starts still down and the jettison cost of fuel, are contractors in the
walls and ceilings trade, as well as providers, catering more to the remodeling
market? Historically, the trade has commented that when housing starts are
slow, residential and some commercial owners turn to remodeling. This
remodeling would not only entail upgrades to cosmetic features of a unit, such
as a makeover on a bathroom or kitchen, but also expanding with additions for
greater living and storage space.
Remodeling activity throughout the U.S. remained
steady during the first quarter of 2008, the National Association of Home
Builders’ Remodeling Market Index announced in a press release from May. The
index charts remodeler perceptions of market demand for current and future
residential remodeling projects. Numbers more than 50 indicates that the
majority of remodelers view the market conditions as improving. The RMI has
been running below 50 since the final quarter of 2005.
“The remodeling market continues to show weakness, following
the downturn in the overall housing market,” said NAHB Chief Economist David
Seiders in the release. “We expect there to be some further erosion in 2008,
with a gradual recovery in 2009.”
Nationally, the RMI components for major additions and
alterations during the first quarter increased to 44.15 (from 42.28). Minor
additions and alterations decreased to 41.57 (from 41.76). Maintenance and
repair remodeling work increased to 39.68 in the first quarter (from 38.11).
The amount of work committed for the next three months decreased to 29.63 (from
33.15 in the fourth quarter) demonstrating a decline in the backlog of
“While remodeling is down nationally, some markets continue
to churn with activity,” said NAHB Remodelers Chairman Lonny Rutherford, CGR,
CAPS, CGP, a remodeler from Farmington, N.M. “Many remodelers are seeing
smaller jobs and have a shorter backlog, but we expect activity to increase
because necessary home repairs cannot be postponed for a long time.”
According to Kurt Withrock, director of demand management
and planning with National Gypsum Co., the current state of the remodeling
market is probably soft as less homes are sold and purchased and “equity money
from cash outs in refinancing have dried up.”
Flipside to Withrock’s observations, Fypon, a manufacturer
of ornamentation products specifically targeted to the remodeling market, has a
different take. The company says that despite the downturn in housing and new
construction, the company continues to see growth in the remodeling business.
Fypon’s Marketing Manager Crystal Rodriguez says homeowners and remodelers
realize the value of remodeling products as a cost-effective way to upgrade
their homes and differentiate in a tough market.
Barry Reid, product development marketing manager with
Georgia-Pacific Gypsum, says the trends he sees within the market suggest that
more homeowners are expanding living spaces, such as basements and attics. He points out that he is seeing more and more
homeowners building in what he calls “vulnerable areas,” those spaces that are
challenged in thermal and moisture related areas.
“Basements struggle with moisture issues and may be a
challenging area of the home to remodel. Remodelers have to keep that in mind,”
“Those are key areas and things we are seeing
[trends] in the remodeling market include attention to energy and water
efficiency along with proper moisture management practices.”
Furthermore, he says going forward, homeowners are paying
closer attention to using more sustainable products. Although the cost may be
higher, the investment in sustainable product lines will add greater value to
the home, and is something owners can market when deciding to put a home up for
sale or take stock that the home now features products that are built to last a
“How it’s relative to our paperless gypsum product’s
remodeling is not just about adding, but about replacing. What we see in
remodeling is an upgrade in materials and practices that basically are better
than what they are replacing. When a shower fails, it may be that greenboard
was used as a tile backer. They won’t replace with greenboard, they’ll replace
it with DensShield because it performs better than greenboard in the shower
area,” Reid says.
This illustrates the point of replacing existing products
with better products, making it a value-add for the contractor to his customer,
With the residential slump at a low, has this strengthened
or weakened the remodeling market?
“Without question the market has slowed, but where we see
the greatest opportunity is in the green conversation,” says Jeff Hire, Owens
Corning’s director, residential products and programs Insulating Systems
Business. “With buildings being the number one user of energy-more than
industry or transportation-the building and remodeling industry has the
opportunity to help dramatically increase energy efficiency and reduce
greenhouse gas emissions.”
He says homeowners today want to live “greener” and reduce
their energy related bills. This provides remodelers and contractors with a
great opportunity to work with their customers to upgrade their energy
efficiency and show them how they can save money on their energy bills and reduce
emissions, he states.
“For instance, properly insulating an attic is one
remodeling project that meets both needs -- insulating an attic to the
Department of Energy’s recommendation can help save up to one-half ton of
greenhouse gases every year! And a properly insulated house can save up to 20
percent in heating and cooling energy related bills,” Hire says.
From a commercial perspective, Dryvit comments on how it
views the state of the remodeling market.
“We see more and more commercial renovations taking place,
especially on structures that are poorly insulated,” says Dryvit’s Tony Stall,
vice president of marketing and sustainability. “A Dryvit Outsulation system is
ideally suited to this type of work, as it allows the interior of the building,
and those inside, to remain unaffected while at the same time, both increasing
insulation and curb appeal of the building, from the outside. Commercial
remodeling will likely increase in a ‘down’ economy, and as more and more
buildings age and are in need of either a new look, additional insulation, or
Dryvit says its products are used very little in residential
remodeling, though in theory the same factors apply to homes as to commercial
structures says Stall. He says as energy costs continue to climb, there is more
interest in making one’s home more energy efficient, and Dryvit says it is
positioned for this demand.
“With high energy costs there may be more interest in
renovations that lower the operating costs of a home by increasing energy
efficiency; this has heretofore been less important than the appearance of a
kitchen or bath,” says Stall.
Materials, a manufacturer of cold-formed steel framing products, says the
current remodeling market for the company right now is not good. Fred Serpico,
vice president of marketing and product development, says the company serves
the remodeling market at 30 percent of its business interests and states that
with housing down, the level of activity in remodeling hasn’t changed much.
Contractors in the states report times are a bit more
sobering. Steve Kuhn, owner of Steven A. Kuhn Construction in Telford, Pa.,
is thinking more in terms of utilizing his time and resources better. With the
cost of fuel, he is planning his day more efficiently and responsibly: packing
lunches, cutting multiple trips to the lumberyard, figuring out how to be more
productive if he is missing a tool or materials, etc.
Yet, Kuhn is upbeat on how he sees business and describes
his activity good.
“On a scale of one to 10 I would say it’s an eight,” says
He has noticed that with the housing starts at a low, his
level of remodeling has gone up. He is working more on home additions that
increase living space, such as basements and attics.
“I know a lot of guys that do construction that were hurting
in home sales, but I’ve filled a few homes, mostly remodeling and renovating.
People are tending more to remodel than build these days. And I would say most
people that live in the same house have so much equity because of real estate
values rising, up until last year. Therefore, remodeling is a no-brainer,” Kuhn
Like Georgia-Pacific’s Reid, Kuhn also believes that a
greater shift towards sustainable building will be among the leading trends in
construction. He says people will place greater emphasis on using more
sustainable building products and appliances.
Times are much harder for Heath Jimerson, owner of Jimerson
Construction LLC, out of Chadron,
Neb. As a contractor that does all
types of construction projects, with an emphasis on drywall, EIFS and finish
work, the work has dried up in his part of the Midwest.
In fact, the situation is quite difficult and complex for the company:
The past year, the company was building a custom home for a
customer with excellent credit and in good standing, according to Jimerson. His
local bank had no problem financing the project, yet when it came time for the
secondary lender to sign off on the project, no bank would take it,despite
supportive comp listings in the area and Jimerson’s good credit line as a
supplier. Long story short, this forced Jimerson to lay off several employees
and reshift his focus on remodeling work and a side-business run with his wife
selling organic pet food.
“I think for us and what’s happened to me in this business,
[remodeling will] be our mainstay now. Our main bread-and-butter was new custom
houses and new commercial. And that has come to a standstill,” says Jimerson.
Some issues are beyond the contractors’ control, as Jimerson
noted through his experience. And as Kuhn says, his daily routine has had to be
readjusted to think on more efficient and concise practices throughout his day.
And as all manufacturers know and most have experienced, it may take diversification
of product lines or business approaches during harsh times. But the good news
is, even if remodeling is holding steady or a little soft, the residential
market could be seeing an upswing within a year.
In regards to a rebound in the market, Rodriguez says it
could be sooner than 2009. “From indicators we’re seeing [Fypon], we believe
the market rebound will occur region-by-region. We believe some regions will
recover as early as the end of 2008,” she says.
Stall says Dryvit at this time believes housing will rebound
in late 2009 or early 2010, at most likely a regional recovery.