Tue, June 10, 2008
It’s A Good Time to Hire a Contractor
In the Boston area – and probably elsewhere – residential contractors are looking for work. For most of the last 20 years, and especially in the last decade, it’s been hard to find contractors willing to do small renovation jobs, but with the slump in residential construction, there appears to be window of opportunity.
Some years ago I was referred to Bob, a wonderful finish carpenter. I had him do a modest kitchen renovation project in my rental property, and he did a great job. Over the next few years I contacted him periodically with other projects: replacing outdoor moldings, porch roofs, a new kitchen and pantry. One day, in response to a phone message, he called to apologize: he no longer did small jobs, and he wasn’t working in Cambridge any more. Why? It happens that Bob really loves doing high-end kitchen renovations, and by that time, the Boston housing market was in high gear. Borrowed money was cheap, and people were renovating like crazy. Consequently, he was able to make a comfortable living doing just the jobs he enjoyed most, and he no longer needed to stray far from his own home on the north shore of Boston to find work.
I haven’t called Bob recently, but I wonder if he’s still as busy now. For years, contractors with much less skill than Bob were able to find plenty of work in Greater Boston. But as I noted in an earlier post, new housing construction in MA has reached a 26-year low. New home builders have turned their sights toward renovations.
But the renovation market is feeling the pinch, too. I heard from an architect friend this week that for the first time in eighteen years, he’s getting cold calls from contractors looking for any work they can find. With home equity sliding and banks tightening their credit purse strings, renovations are down. Home improvement is definitely not booming, as evidenced by Home Depot’s 66% profit drop in the first quarter.
All this suggests to me that now should be a good time to find contractors willing to do jobs that they’d have turned down a few years ago. They’ll probably even return your phone calls; around here that would be a marked change from the last decade.
A couple of caveats
In spite of the slowdown, don’t assume that you can get work done for a bargain price. The cost of building materials has been increasing faster than general inflation as construction demand increases worldwide and the dollar remains weak against other currencies. You should be able to get multiple contractors to bid on your projects, but costs are likely to be higher than a year or two ago.
Don’t assume that you can recoup the cost of a renovation through increasing the value of your home. In the short term, the cost of a renovation typically exceeds the resulting increase in a house’s value. Check out Remodeling magazine’s annual survey of the payback value of different remodeling projects. For Boston, for example, the biggest payback percentage was for siding replacement, which increased resale value by 92% of the project cost. There can be exceptions to this general rule; for example, adding a second bathroom to a one-bath house in a neighborhood where two bathrooms are the norm could boost a home’s value by more than the averages in the survey.
See what the numbers are like for your region and the project you have in mind, but remember that these are last year’s data. Material costs are up and home prices, depending on where you live, are mostly flat or lower, so the payback ratios have likely dropped. Unless you’re a skilled “do-it-yourselfer,” chances are that a major renovation isn’t going to be a good “investment” in your home in the near-to-mid term.
Good reasons to renovate
If you’re making a renovation to enhance your enjoyment of your home, that’s probably the best reason to do a renovation. If you’re looking to sell your home quickly, minor improvements and repairs could help shorten the time it takes to get it sold. Be sure to seek the advice of a good realtor or some other experienced person who knows the housing market in your specific area before spending money to spruce up a house. As I’ve noted before, housing trends can vary greatly even with the same town, so make sure you have information that’s relevant to your specific house before making a decision that’s based on the expectation of a short-term economic return or a faster sale.
