Qualified Remodeler helps independent remodeling firms to survive, become more professional and more profitable by providing must-have business information, namely best business practices, new product information and timely design ideas.
Issue link: https://qualifiedremodeler.epubxp.com/i/103814
WHAT'S ON REMODELERS' MINDS? Board. The survey specifically asked about home equity lines of credit, and in the third quarter most respondents were still modestly tightening their criteria for lines of credit or keeping the criteria basically unchanged. Overall, more were tightening than easing criteria. The flip side of that question is that demand for home equity loans was st reng then ing, but not by a lot. Nevertheless, "the bottom line is people were looking to borrow more, and banks were still willing to lend less," Baker says "There are some good rates out there," he says, "but it's not clear how much money is available. I think banks are still very nervous about lending, and there are still a lot of hoops to jump through if [a homeowner] wants to take out a home equity loan. [Banks] are very cautious about appraisals and what share of the value of the home [homeowners] can borrow against." Remodelers, in conversations with QR, have noted an increase in projects that are self-funded by homeowners. "That's always been true," Baker says. Remodeling is an industry "that for some reason doesn't rely on a lot of financing or a surprisingly low share, but the share that has used financing has been going down in recent years, and the No. 1 reason is banks are hesitant to lend. Secondly, homeowners are hesitant to borrow. A lot of folks don't want to put their house at risk by borrowing against the equity and risking another downturn after all of the foreclosures they've heard about," he says. Cash on the Barrelhead As a result, Baker explains, more and more homeowners are saving to pay cash for home improvement, and it makes them more price sensitive. When projects were financed by a home equity loan, upselling might mean an extra incremental payment of $50 a month, but with cash it could add an extra $2,000 or $3,000 to the bottom line immediately. "I think owners are just unwilling or unable to go that distance now," Baker Question: What is the biggest single change you've observed in the remodeling market that will significantly impact the market in 2013? Following are some of the comments left by survey respondents: • Change in customers' attitudes toward the economy. People are optimistic. Not like four years ago, when everyone was in a stall phase. • Averagejobsize,althoughgrowingagain,continuestobesmall. • In 2012, I saw four home equity checks pay for projects. This is the first time in four years I have seen this form of payment. • Duringthedownturn,wehavemarketedandsoldeffectivelyenoughtosurvive.However, iflendingrequirementsweretoloosenjustabit,growthcouldbehadin2013. • Pent up demand from the past three years — customers are ready to buy and upgrade. • Thewantlistisgone.Replacedwithhave-to-dolist. • Probably the recent hurricane will impact the local workload and demand for contractors. • Big-boxstoresbecomingahugecompetitionforus,wherebeforetheycouldn'tmeetour quality.Eitherconsumersareexpectinglessandgettingwhattheypayfor,orthebig-box companiesareofferingproductsthattrulycancompetewithdealersandshowrooms. • I believe consumer confidence is still low and that the economy will continue to limp along. I really think business next year will be flat. • Increasedinterestinlargerprojectssuchaskitchens,bathsandadditions. • Consumers who are increasingly knowledgeable, and demanding building science and building smaller and better. • Technologyandthespeedinwhichabidisturnedaroundandpresentedtotheclient. • Consumer readiness. We're receiving phone calls as of late from customers we visited anywhere from six months to three years ago, who never moved forward with their project, and are now ready to move forward. • Regulationfromgovernmentagenciesandhealthinsurance/benefitcostsforemployees. • People are starting to see that it's not as bad as they expected it to be, so they are spending money. We just have to keep the fear down, and people will go back to spending. • Ibelievethatthepastfouryearshavedecreasedavailablecontractorssothingswillbe betterforthesurvivors. • I live in the Buffalo, N.Y., area and here we have not seen the release of real estate from the judicial morass that other areas have. These massive quantities of properties are starting to be filtered out to the market, which will spur the money to start moving around again. I always said that Buffalo survives in its own little snow globe and doesn't follow national trends, so hopefully this will shake up the snow globe and get things moving again. •Goinggreenisgoingaway.Peoplearemakingdecisionswiththeirpocketbooknow,not whatitwillsavethemfiveto10yearsdowntheline. •Weareinaboommarket,sothebiggestchangeIseeismoredemandandanevensmaller labor pool to choose from. •Weareseeingariseinclientsthatareinterestedinbuildinghealthy—not"green,"but beingmoreawareofwhatisbeingusedintheirprojectsandhowthoseproductsaffect themselvesandtheirfamilies. •Morecompetition.Laid-offemployeesfromotherindustriesareenteringtheremodeling business. They do not know their cost and how to price a job to cover their operating expense and profit. The customer is either unaware or indifferent. They are mainly interested in receiving a low bid without qualifying the contractor. •Lackofqualifiedskilledworkers. says. "The [homeowner's] budget is pretty firm, and [remodelers] had better figure out a way to come in within that budget if they want to get the job." Although financing remains an obstacle to recovery, other factors that broadly affect the U.S. economy could put a stick in the spokes of recovery, too. As of this writing, the much talked-about "fiscal cliff," and the possibility of negative growth numbers if that cliff is not circumvented, still looms as a worrying scenario. "That could be a very, very serious problem in terms of continuation of the trends that we ForResidentialPros.com QR January 2013 25