Tom Varghese remembers getting a bid to remodel the kitchen in his Rockville, Md., home two years ago and balking at the $35,000 price tag.
But in April, with a wife who was seven months pregnant, the product manager and part-time travel agent cast around again for bids, hoping that he could squeeze in the job before the baby came.
This time, he says, the winning bid for the kitchen was about $10,000 lower, prompting him to embark on a whirlwind remodel of their entire home — including a new deck, new hardwood flooring, paint and lighting, and a complete overhaul of the kitchen and three bathrooms. The price tag for the whole house? $60,000.
"We had heard the cost of materials had dropped," Varghese says. "But we had no idea that prices had decreased this dramatically. I nearly fell off my chair."
Now's the time
Indeed, for those homeowners who can afford it, now may be one of the best times to embark on renovation plans. The steep cutbacks in the remodeling business, coupled with greater contractor competition and lower materials prices, are bringing many projects in for 15% to 20% less than just a couple of years ago.
Those discounts had yet to show up for most projects in Remodeling Magazine's 2008-09 Cost vs. Value Report, released in November 2008. That's probably because most of these bargains have been passed along more recently, says Kermit Baker, director of the Remodeling Futures Program at Harvard University's Joint Center for Housing Studies. "These (Remodeling Magazine) numbers are done once a year," he says. "The market just began to weaken more severely over the last three to six months."
People are still making repairs and doing work on their homes. But bigger additions and fancy bathroom and kitchen remodels are now on the wane, he adds.
Moreover, lower financing costs are making it much more affordable for those on a steady economic footing to fund these jobs, Baker says.
"It's a very attractive time to do it," he says. "Remodeling contractors are hungrier for business (because) they don't have the workloads they did a couple of years ago. They are willing to negotiate, and the cost of materials has gone down."
Indeed, says Craig Smith, chief executive officer of ServiceMagic, a national referral firm for service companies, "in the past, it may have taken six to eight months to find a top-rated professional; now you are able to book a top professional much sooner." (ServiceMagic is a partner of MSN Real Estate.)
Paul Zuch, owner of Capital Improvements, a remodeling firm in Dallas, says he has a lot more room on his plate with business dropping 30% this year. The slowdown has forced him to drive as far as an hour away for some jobs and pick up much smaller jobs than the extensive remodels and additions he had focused on in years past. "We are working for quite a bit less than … two years ago," he says.
Service with a smile
That's in part because there are a lot more people out there competing with remodelers such as Zuch’s firm. A flood of smaller builders have been forced into the remodeling business, as the number of new housing starts has plunged — free-falling 80% in March from their high in January 2006, according to the National Association of Home Builders.
But with the economy suffering and home sales and values stagnating, there's far less work to go around.
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Contractors are now returning calls quickly and, in some cases, jumping at the chance to start jobs. "You can't walk into a Home Depot these days without having three people walk up to you with their business cards," homeowner Varghese says.
That's a different story from just two years ago says "Captainlynne," responding to a message-board post on remodeling. "(In the past) it took us two months to remodel a bathroom that was supposed to take one to two weeks. Now we've noticed that the people we hire are much more courteous and actually return calls, then show up to do the work when they say they will."
And many are making concessions to get the job, says fellow message-board responder "Tarcapone," whose contractor offered to throw in the cost of the $300 Dumpster and $500 in materials for a job that cost $6,000 in labor.
I agree the contractors are greedy just like Wall Street. My bathroom is 5' by 8' and the average bid was around $5,000.00. And that was for nothing special.
