Costly Remodeling Projects Put on Hold in Uncertain Economy
To remodel or not to remodel? That’s a question many homeowners are asking themselves as they cope with an uncertain economy and an even more unsure real estate market.
“In a market where homes go up in value, no expense is spared on remodeling,” observed Donna Beebe, sales manager at the North Valley regional office of Fred Sands Realtors in Northridge. “The expenses are easily digestible when you know there’s a payoff.” But now that it’s hard to sell a home and home prices are flat at best, “people are holding back from doing major remodels,” Beebe said.
“My personal view is if I can’t double whatever the remodeling investment is, I won’t do it.”
Plenty of people apparently share Beebe’s sentiment. Los Angeles residents pulled residential addition and alteration permits totaling $159 million during the first five months of 1992. That compares to $184 million for the first five months of 1991, and $210 million for the same period in 1990, according to figures compiled by the Construction Industry Research Board in Burbank.
While it isn’t possible to calculate exactly how much the remodeling business is suffering, it’s fair to say most Valley residents are much more circumspect about putting money into their houses and condos these days.
Steve Goldman, owner of AAAcon Builders in Sherman Oaks, said his company is getting fewer calls for work and customers are limiting themselves to projects that have to get done. “They’re cutting corners,” he said.
For example, many of Goldman’s customers are scaling back on costly finishes such as marble and granite in bathrooms and kitchens. Now there’s more ceramic tile and vinyl flooring. Homeowners are often eliminating expensive lighting or pricey architectural details, Goldman said, so that they can expand and improve without spending more than they feel they’ll be able to recoup.
“People are worried about losing their incomes,” said Thomas Auten, vice president of Northridge-based general contractor Auten & Sons Inc. Those who are spending money on their homes now are either in need of space for their growing families, or are older empty-nesters who have no plans to move any time soon.
Recent jobs Auten has worked on include waterproofing projects that are a necessity. Kitchens and baths are still among the most popular remodeling projects, but his clients are less extravagant. Many homeowners are also opting to repair and maintain roofs or heating and cooling systems rather than splurge on a replacement, Auten said.
“The riots haven’t helped matters much,” complained Les Berman, president of Pineridge Construction Ltd. in Westlake Village. “People are getting information about remodeling jobs, but they are not making decisions. We’ve never seen this before.”
According to a 1991 survey by the National Assn. of Home Builders, 50% of homeowners nationwide reported wanting more amenities as their reason to remodel. The need for more space was cited by 47% of respondents. And just 28% said they remodeled to increase the value of their homes. Still, the expectation of some eventual return on remodeling dollars has long been trumpeted by home magazines and realtors.
Remodeling magazine did a 1991 survey of realtors and reported that Angelenos spent an average of $22,300 on a major kitchen remodel and recouped about 104% of their investment. The national figures are $19,800 and 89%, respectively. Bath additions translated into a 142% return on cost in L.A., and bath remodels returned just 93%, the magazine said. Sun rooms, deck additions and master suites returned 80% to 90% of a homeowner’s investment. None of these numbers is even close to scientific, though, particularly given the ongoing housing slump.
That may explain why homeowners who are remodeling are doing so not for financial gain but for their own needs and comfort.
Owners of a tract home on Fieldmont Place in West Hills recently finished converting part of their garage into a multipurpose workroom. The couple did, however, decide to delay plans for a new master suite atop the garage, said their Santa Monica-based residential designer, Bruce Tucker.
“Just as the couple was about to start construction, they became very nervous about their financial needs,” Tucker said. As a compromise, they went ahead with the garage conversion and strengthened the foundation for the future addition of a second story. Eventually, the second story will probably get built.
“They want to stay in their home for at least five more years,” Tucker said. Besides, “it’s a neighborhood full of children, so an expanded house adds value.”
Lori and Hank Landau are putting the final touches on a major remodel that involved almost every room in their four-bedroom, three-bath home in Tarzana.
“We intended to remodel when we bought the house,” said Lori Landau. What they didn’t plan on was going way over their $100,000 budget, she said. But there are no regrets. “We didn’t do it for the sake of selling.”
An extra family room may be next--whether or not the housing market improves.
“The market really isn’t an issue so much as what we can afford,” Lori Landau said. “We’ll probably do a pretty basic child-proof room.”
“People recognize they won’t get the money back any time soon,” said Studio City architect Stanley M. Brent, coordinator of a remodeling conference at UCLA Extension in August. “For years you couldn’t sell a home without a pool. Now it’s not a factor.”
