Southland Sees Momentum Build in Home Remodeling
Flush with equity--and confidence--from rising real estate values, Southland property owners are fueling a new boom in home improvement and remodeling projects they did without for much of the 1990s.
In the San Fernando Valley, post-World War II-era houses are getting everything from added sun rooms to high-tech kitchens. In Huntington Beach, modest 1,300-square-foot homes are becoming 2,300-square-foot showplaces. In Newport Beach, they’re spending $70,000 on kitchen cabinets alone.
Throughout the region, factors ranging from low interest rates to a historically low supply of homes on the market have the housing face-lift business running at full bore.
“Our members are busier now than they’ve ever been,” said Brett Martin, a spokesman for the National Assn. of the Remodeling Industry. “It’s to the point where they’re turning away jobs sometimes or telling the homeowner that it’s going to be six or eight months before work can begin.”
In California, the Burbank-based Construction Industry Research Board estimates there will be $3.3 billion in home repairs and remodeling work this year. That’s still shy of the record $3.8 billion in 1990, but represents the highest tally in the state since 1992.
In Orange County, homeowners are expected to spend about $270 million on alterations and additions this year, according to Ben Bartolotto, research director of the board, who bases his estimate on building permit data. That’s the most activity since 1991, when residents spent $275 million. The peak occurred in 1989, when homeowners put $295 million into their homes.
An estimated $900 million will be spent on home additions and improvements in Los Angeles County this year, according to Bartolotto.
Although that is short of the $1.1 billion spent after the Northridge earthquake and the record $1.4 billion spent in 1989, it’s 16% higher than last year’s figure.
Some people caution that the current urge to splurge will boost consumer complaints in the months ahead, as anxious homeowners rush forward on projects without checking contractors’ references and getting competitive bids.
But that would come later, after the paint dries and the concrete hardens. For now, the rising sea of sawdust is lifting the fortunes of carpet dealers, mortgage brokers and remodeling contractors such as David Newey.
Newey, owner of Westchester-based DLN Construction, headed to Las Vegas and San Francisco a few years ago when he could not find work at home.
“I had to take work where I could get it,” said Newey, who specializes in residential projects. “This year, it’s all local. Compared to two years ago, my business is really up . . . about 100%.”
Allen Braverman, owner of Kitchen Designs Unlimited in Orange, has posted $1 million in annual sales so far this year, a figure he says he usually doesn’t hit until October or November.
“Frankly,” said Rafael Fernandez, owner of Rainbow Building and Development in La Habra, “my biggest problem now is that I’m tired.”
Experts say that rising property values have given homeowners not only the equity to finance additions, but the faith that their investment will pay dividends by raising the resale value of their homes.
“A lot of my old clients are doing additions because the equity is there now,” said mortgage broker Mark Johnson, vice president of Woodland Hills-based Troxler & Associates. “There wasn’t the equity there for a while. And there wasn’t the confidence that what they were doing was a prudent financial move. Now they’re more comfortable putting money into an asset that has started to increase in value again.”
And one contractor noted that the “wealth effect” from the long-lasting bull stock market is adding to many homeowners’ sense of prosperity.
“I don’t know that people are thinking ‘Gee, I’m richer now,’ now that the Dow [Jones industrial average] has gone past 10,000,” said Alon Toker, president of Mega Builders in Van Nuys. “But some how you feel upbeat because the future looks bright.”
For many would-be home buyers, remodeling is a home-grown solution to the problem of an increasingly tight housing market, said G.U. Krueger, deputy chief economist of the California Assn. of Realtors. The tally of homes on the market as measured by the association’s “unsold inventory index,” is at its lowest level since 1989, Krueger said, adding that there currently is less than a five-month supply of homes on the market in Los Angeles County.
“It’s very hard to find homes that are to your liking,” he said, “so remodeling is one of the options.”
Much of the remodeling work in the Southland is focused in affluent communities, such as Los Angeles County’s Bel-Air, Sherman Oaks, Brentwood, Pacific Palisades and Encino.
Sharon Cardenas has to speak over the din of framers, electricians and plumbers when she describes the $150,000 remodeling job at her West Los Angeles home. She is confident the work will be a sound investment.
“The Westside, after having been flat for a long time, is not flat anymore in terms of prices,” said Cardenas. “There’s a lot of activity now; it’s a happening area.”
Also driving the remodeling boom is a desire by homeowners in older neighborhoods to add amenities that they see in brand-new residential developments, like modern kitchens and large walk-in closets.
In the Valley, nearly 40% of the housing units were built before 1959, according to U.S. census figures.
“Those houses are getting a little long in the tooth,” said Jack Kyser, chief economist of the Economic Development Corp. of Los Angeles County. Kyser said other factors behind the boom include the lack of new housing in established communities and demographics.
“You have a very upwardly mobile Hispanic population” in the Southland, he noted. “They will go into older areas, and because they may have larger families, may add an addition.”
For consumers, all of this communal space-making means shortages of some items, such as drywall, and price hikes.
Charles Reeder, owner of Reeder Construction in Orange, said the increased demand has led to nearly monthly increases in the price of lumber. And consumers are facing waits of two months or more for some of the best contractors, even for fairly simple jobs.
Still, some anxious homeowners--fearing they will be left without cabinets or the contractors to install them--are forgetting the age-old adage: Shop around.
“There’s an urgency now. People feel they are going to miss the train, so they rush,” Toker said. “A year ago, everybody had composure. Now, everybody is in a hurry to get things online.”
Therein lies the potential problem, according to several lawyers and an official with the Sacramento-based California Contractors State License Board.
“When there’s money to be made, when you experience a boom, as there is in this field, there is going to be a number of unscrupulous people that are just in it for the money,” said Robert Fink, vice president of the Consumer Attorneys Assn. of Los Angeles, which represents consumers in product liability cases, class action suits and related matters.
Fink said he is getting more calls from homeowners with concerns about their home improvement projects. However, Lynette Blumhardt, a spokeswoman for the state contractors board, said she’s seen no increase in customer complaints.
Most inquiries, attorneys said, do not end in lawsuits. But they noted that the potential for suits increases with the size the job. And experts here and nationally say the size of the jobs is increasing.
Martin of the remodelers association said that nationwide the number of high-end jobs, with price tags starting at $500,000, has doubled in the last five years and accounts for about 10% of the business.
Toker noted that four years ago, when his company was handling more small jobs such as stucco work and modest kitchen remodeling, the average tab was $5,800. Now that there is more work at the upper end of the scale, the average is $75,000.
Many contractors said they anticipate that the boom of 1999 will spill over into the new millennium, at least in Southern California.
“The market here will outlast the market elsewhere in the United States because we started later,” Toker said. “The party is a year old [nationwide] and it will run a year and a half to two years. Now the party is here, and it’s going on all over the place.”
