Turning The Corner | Local home remodelers says business is finally starting to improve
Photo/Edd Cote
Chris Lund of The Heritage Cos. in Shrewsbury says his family's remodeling business started to improve last year.
Central Massachusetts remodelers say they are seeing signs of a recovery after the worst downturn for the industry in 50 years.
The local recovery follows national trends, according to Harvard University’s Joint Center for Housing Studies and several remodeling indices that say 2011 will be a recovery year across the country for the industry.
For the family-owned Heritage Cos. in Shrewsbury, recovery came a bit ahead of schedule.
“In July and August of 2010 we started getting calls,” said Chris Lund, the company’s vice president.
Getting inquiries about remodeling projects in the dead of summer is unusual, Lund said. They usually come earlier, in the spring. Looking back, the Lund family has pinpointed that time as the moment the remodeling recovery started for their company.
Stayin’ Alive
“At this point, if you’re still standing, you’re breathing a big sigh of relief,” said Guy Webb, president of the Builders Association of Central Massachusetts.
Remodelers suffered during the recession from 2007 to 2009, during which the industry lost 12 percent of its value, according to the Harvard report.
Many went out of business. Those that survived came out leaner. Heritage, which had to lay off nearly half of its 23 employees, many of them during the recession, is no exception.
Carl Lund, Chris Lund’s father and president of the company, has been through downturns as a builder and remodeler in nearly each decade since the 1960s. He has come through them all. But he concurs that the past few years have been the worst for his industry.
“Laying people off is the pits,” Carl Lund said. “You do what you have to do to survive.”
The Heritages Cos. has come out smaller and more in debt, but it is steadily building a backlog of business, a relief for the family. They hope to do more hiring in the future.
The Lunds are not alone. Industry indicators are pointing towards a recovery in the nearly $300-billion U.S. remodeling market.
The Statistics
The Harvard report predicts steady growth of 3.5 percent annually for the next several years. That’s compared to a 12-percent drop from 2007 to 2009.
The National Association of Home Builders and BuildFax, which tracks building permit data nationwide for its remodeling index, have similar predictions.
The BuildFax index for May showed the Northeast up 2.7 points, or 4 percent year over year, and 4.5 points, or 8 percent, month over month.
The National Association of Home Builders’ index also shows signs of recovery. The association has noted growth, albeit slow, since the first quarter of 2010. In the first quarter of 2011, the association’s remodeling index hit the highest point it has been at since early 2007.
Fueling the remodeling recovery is a glut of foreclosed properties needing repairs, tightened lending standards that make it more difficult to get financing for new homes and general economic improvements, according to the report.
While those factors exist in the metropolitan regions of New England, this area also has its own unique set of factors that are also contributing to the recovery, said Webb of the builders association.
Land values are still high, he said, and it remains expensive and risky to build new homes.
“People are less likely to buy a new home when there’s a glut of existing homes on the market, sometimes below market value,” Webb said.
Webb said that another local indicator for him is watching the people who attend his association’s annual trade show in March. This year, he said, several people showed up with blueprints and others were asking for referrals for remodeling projects they wanted done this summer.
“They were coming through for a purpose,” he said.
Survival Strategies
The Lunds said that their average remodeling project now tends to be smaller in scale or less expensive than in the past, but said the jobs are coming in higher quantities. They have kept a wide range of services, careful to avoid the effects of consumers “pigeon holing” them as specializing in one area.
Chris Lund said current projects for the company include building decks, constructing second stories on homes, approximately a dozen roofing jobs, renovating bathrooms and landscaping.
At Flo-Dell Building & Remodeling in Millbury, owner Ron Floser said his business thrived on insurance claims work stemming from ice storms in the area during the recession. And his employees are still finishing up several renovation jobs resulting from damage caused by ice dams this past winter.
“Any contractor living in the Millbury-Grafton area fared very well because of the damage to houses,” Floser said.
Floser said that he received three inquiries in May about building new decks. Those calls hadn’t come in for several years.
But Floser also isn’t ready to call it a recovery just yet.
“I honestly don’t know if it’s going to be this year,” he said.
Floser thinks some contractors are bidding too low just to get work. He said his company has been called recently to finish two jobs in which the contractor quit working because, Floser thinks, they “ran themselves into the ground.”
Potential customers are also soliciting more quotes than in past years. Several times recently, Floser said his employees have shown up to a scheduled appointment to give a quote and have found another contractor still in the home doing the same.
At Creative Cabinets in Worcester, owner Tony Maruca noted several recent shifts he has noticed in the business he has run for 30 years.
Maruca said that his employees are doing projects in older homes around Worcester as a cyclical shift in population demographics occurs — older people either move out or pass away and there are homes sold to younger people.
Creative Cabinets has traditionally thrived over the years on higher-income clients, Maruca said, but when credit is loose, the additional business that comes from people 40 and under is a “bonus.”
“That bonus is gone now,” he said.
While Maruca’s business was insulated from the recession by catering to wealthier clients, it did not come out unscathed. Five years ago, Creative Cabinets had six employees. Maruca said he was forced by a slowdown in business to convert four of those positions to subcontractors.
That offers its own set of challenges, he said, because subcontractors sometimes create project delays because of their scheduling with other projects.
But Maruca has a long-term outlook on his market. The remodeling business can be a roller coaster, he said, tightly tied to the performance of financial markets and the status of the economy. He said that companies that establish themselves over the years, plan accordingly and are able to adapt will stay in business.
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