Talk of recession may be looming over the economy and the stock market may be caught in a downward spiral, but the remodeling industry in Massachusetts is still riding a three-year high that shows no signs of descending.
The Joint Center for Housing Studies of Harvard University, a leading source for information and research on housing in the United States, recently released a major report, “Remodeling Homes for Changing Households,” that outlines the strength of the remodeling industry nationwide. The study found that American homeowners spend $180 billion a year on remodeling, nearly as much as is spent on new construction.
The conclusion? Professional remodeling is growing in importance as the housing stock ages, and as land and permitting for new construction become more difficult to obtain.
The Bay State is no exception to the remodeling boom.
“For the short term, I keep reading about the crashing stock market. But the recession is not existing in the remodeling world right now. That’s not to say we won’t feel a ripple six or eight months from now,” said Peter Feinmann of Arlington-based Feinmann Remodeling. “But we’re seeing little effect on remodelers.”
“I lost in the stock market, but I’ve been remodeling my own house,” Feinmann added.
Kitchens and bathrooms, and family rooms with master bedrooms above them, are among the most popular remodeling projects, he said. And as the housing stock ages, especially in New England, remodeling projects become that much more complicated and snowballs into full-blown restoration projects.
“There are those who spend $100,000 just replacing their bathroom; it’s the ‘while we’re at it’ syndrome. I’m not kidding, it’s a trend. People are upselling, saying ‘if we’re doing this, why not do this too,'” Feinmann said. “As long as people still have their jobs, they’re still spending the money.”
Boston is among the top 10 areas for remodeling spending in the country, according to the Harvard report. Major metropolitan areas in the state such as Greater Boston, Worcester, Lawrence, Lowell and Brockton ranked eighth among the top 35 metro areas for remodeling spending, with a total of $14 billion spent.
The New York/Northern New Jersey-Long Island area ranked first, with $62.3 billion spent in that area.
Homeowners in such older metropolitan areas spend nearly 20 percent more than their counterparts in other areas, according to the study. But the study does predict a gradual shift of the height of remodeling activity from the Northeast and Midwest to the Sun Belt.
Homes in the Northeast and Midwest were built mostly before 1950, and have already passed the typical threshold of spending for needed improvements. Houses in the South and West, built during the 1970s, are just reaching the critical age for remodeling. The study predicts that areas such as Houston, Phoenix and the Florida cities of Tampa and Miami should see a sharp rise in remodeling in the next 10 years.
However, higher-income metro areas, regardless of geographical location, will likely continue to see greater spending on home improvements, the study concludes.
“People are in the position where they have some money to spend. They want to upgrade and they’ve been waiting for this point in their lives for a long time,” said James O’Neil of O’Neil Remodeling and Construction Corp. in Beverly.
A Constant Problem
The Greater Boston market is a discriminating one, Feinmann said, with the particularly lucrative high-income market northwest of Boston along the Route 128 rim. What remodelers are faced with now is a shortage of skilled, available personnel.
“The numbers are just not there, and what’s actually happening is that the cost of remodeling is going up, to people’s chagrin,” Feinmann said. “I’m seeing prices double from the last four to five years. I’m amazed: I’m looking at a project that would have been $15,000, maybe $24,000, that’s now $30,000 to $35,000.”
Feinmann is not alone among his colleagues.
“Prices are up, all the tradesmen are charging more, materials are more expensive. Everything’s gone up. But there’s competition out there as well,” O’Neil said.
“When it gets so busy, a lot of employees leave and start on their own, which causes tremendous problems, because often they don’t have insurance or [injury compensation plans], or the knowledge and skill to get the job done under budget and on schedule,” he said. “A lot of times a customer goes for the low price, but pays for it in the end. It’s a constant problem.”
Ultimately, extra costs are passed on to the customer.
Construction jobs have always been entry-level employment, the remodelers noted, which can be a problem when faced with a highly demanding client base.
“It’s hard to get people, which places a limitation on how much we can do. It all depends on how much good quality help we can find,” concurred Harry Smith of H.F. Smith Construction Co. in Weymouth. “We actually turn away as much work as we do, because of a shortage of help.”
Some projects require a high degree of skill that is even harder to come by, Smith added.
The number of remodeling contractors has skyrocketed in recent years, according to the Harvard study. Nearly 200,000 self-employed remodeling contractors exist in the nation, plus about 172,000 firms with payrolls. Between 1987 and 1997, the number of remodeling firms increased by 50 percent.
However, increases in the amount of new firms is somewhat offset by the large numbers of eager young contractors looking to run their own businesses during the height of a remodeling boom, but eventually fade from the scene due to inexperience, said Smith.
“A lot of tradespeople think it’s easy jobbing on their own, but they find they haven’t calculated their costs, such as overhead,” he said.
Shortage of good help is a constant problem, O’Neil said. His company offers enough benefits to entice people to work there. Without such incentives, he would have no one, he said.
“It’s an employee’s market out there,” he said.
According to the Harvard report, the fragmentation of the remodeling industry has increased, with few barriers to encounter and a third of states having no requirement for licensing or certification of remodeling general contractors.
However, while the remodeling boom may have prompted many to enter into the business on their own, the study notes signs that the industry may begin to consolidate as larger firms create a presence on the Internet, install sales programs and expand their services through general contracting firms. The 9 percent of firms nationwide earning $1 million or more make up half of the total remodeling revenue in the country.
Established firms, which also tend to be large, often focus on higher-end remodeling projects, where competition is less intense, the study found.
The study concluded that remodeling spending should remain at about the same strength for at least the next decade.
Especially in the Boston area, where land is a commodity and building codes are among the toughest in the nation, more homeowners are turning to remodeling to turn their current homes into dream homes.
“Land is a commodity now; it’s at a premium. To buy land and put a house on top of that is a lot more expensive than remodeling,” said O’Neil.
The trend toward creating a dream home through remodeling rather than new construction will likely continue, Feinmann agreed.
“Until people see their jobs at risk, they’re still going to see the financial advantages of remodeling. They’ll see that it’s still a good investment, personally and financially,” he said.