Hard Times Remodel Housing Field : Home Improvement Prepares To Displace New Construction As King of Housing Industry
After spending six years sharing a single bathroom with his wife and two children, salesman John Brummelcamp is adding a second bath and two bedrooms to his two-bedroom Temple City home.
His monthly mortgage will rise by $300 as a result of the $50,000 equity loan he took out to finance the 800-square-foot addition. But that’s only a third of the increase had he bought a bigger house.
“The dollars and cents pointed us in this direction,” he said. “It really doesn’t make financial sense to move.”
Many other homeowners are reaching the same conclusion, setting the stage for home improvement to displace new construction as the king of the housing industry in the next few years.
“People are adding on like crazy,” said Douglas Ewing, a Pasadena architect who is a member of that city’s design review board. There has been a big increase in remodeling plans coming before the board, he said.
In Los Angeles and Orange counties, the value of residential building permits for alterations and additions was $1.3 billion last year, up more than 15% since 1988.
Nationwide, home improvement spending since 1987 has been growing faster than spending on new home construction, the U.S. Department of Commerce says.
Annual revenue at the nation’s largest remodeler, Omaha-based Pacesetter Corp., climbed 7% last year to more than $100 million, and in January the company posted record sales in the 41 cities where it operates, President Harley D. Schrager said.
Home remodeling typically does well during a recession compared to home sales. But recently, remodeling has also benefited from the drop in interest rates. While low rates have also spurred home sales, years of rising home prices--especially in Southern California--have led many homeowners needing extra space to conclude that remodeling is more economical.
Joe and Jenny Sauer thought about moving until they saw the remodeling job Santa Monica architect Trevor Abramson did on their son’s house. They were so impressed that they hired Abramson to create a new kitchen, bath, closet and sitting room in their Fairfax District home.
In Studio City, Kenneth and Sandy Lavet have decided to spend $125,000 to add about 1,000 square feet to their home after a house-hunting spree revealed that they would have to pay more than $500,000, as well as sharply higher property taxes, to move into a comparable-size house in nearby neighborhoods.
“Low interest rates make it easier for us to refinance our home and pull out the equity,” said Sandy Lavet, who added that she and her husband paid $172,000 for their 1,500-square-foot, two-bedroom home seven years ago.
Aside from current economic issues, some experts say changing demographics portend a long-term boom in home remodeling. After spurting 11.9% in the 1980s, the U.S. adult population age 16 and over is expected to grow just 8.9% this decade. That slowdown could produce a 21% reduction in demand for new housing units in the United States by 1995, predicts economist Leonard Mills of the Federal National Mortgage Assn.
Meanwhile, both the U.S. population and housing stock are growing older, and that should set off an explosion in remodeling activity. The average U.S. home is already more than 25 years old, and elderly homeowners aren’t as likely to trade up to a new home.
“As the population gets a little older, people tend to get a little more settled,” Mills said.
“The outlook for remodeling is exceedingly bright,” added William Apgar, executive director of the Joint Center for Housing Studies at Harvard University. “For years, remodeling has been the stepchild of the building industry. . . . But there are about 100 million existing homes out there. You better believe that as homes get older, consumers are going (to remodel) to protect their biggest and most valuable asset.”
Said Taylor Grant, who heads his own Newport Beach building firm: “Who we’re hearing from mostly are growing families who are in a neighborhood they like and don’t want to move. Plus, a lot of the housing stock is old.”
Both of those factors figured in San Pedro resident Rick Matthews’ decision to undertake a $40,000 remodel of his modest two-bedroom bungalow. After remarrying recently, he found that the thin walls of the 80-year-old house didn’t provide enough privacy for himself, his new wife and 12-year-old daughter.
“Once the kids (become) 8 to 15 years old or so, there’s a new life cycle” that spurs parents to seek more privacy or comfort, explained Jim Dickmyer, who is president of his own remodeling company in Upland. “Dad can no longer make that run down the hall to the bathroom with just his shorts on.”
The trend is already spurring many smaller builders to diversify into remodeling. It is also pressuring home supply manufacturers to form closer alliances with home improvement contractors and consumers.
“When we started 26 years ago we were doing mostly new construction; but remodeling makes up 30% to 40% of our business” today, said Roger Glunt, president of his own Pittsburgh construction firm and a National Assn. of Home Builders officer.
Sears, Roebuck and Co., a Chicago-based retailer that has become the nation’s largest home remodeler, has seen its home improvement business grow 400% since 1983 to more than $1 billion a year, said Bill Patterson, Sears’ vice president of home improvement. Sears now counts 10,000 affiliated plumbers, electricians, carpenters and contractors in its program.
Remodeling fever has even struck the airwaves, where more than 10 shows on home improvement vie for viewers, including the ABC television comedy “Home Improvement.”
“I never imagined when I first started in this business (more than a decade ago) that home improvement would become such a big” industry, said Bob Vila, widely viewed as the guru of home improvement and host of the syndicated series “Home Again With Bob Vila.”
