Re: Home Renovations on Sale

Money Magazine and CNN Money.com recently published an article by Donna Rosato, Money Magazine senior writer entitled Home renovations on sale

"Materials costs are plunging, and contractors are begging for work. Suddenly that long-postponed remodel is looking like a smart idea."

A lot of the things the article states are true. No doubt about it. But I have differing opinions on how well homeowners might fare if they embark on a bargain-hunting kitchen remodel in the near future.

While they may save a bit on some materials and be able to buy bargain priced products from companies on the brink of, or in, bankruptcy; most of the most expensive products for mid to high end kitchens have just INCREASED in price.

I have done some surveys of cabinet and appliance dealers in the San Francisco Bay Area, and the manufacturers of their products have all done their usual first of the year price increases.

I have also called some quality remodeling contractors, told them about the article, and asked how they are handling the slowdown. None said they were prepared to cut their prices to deal with it.

Instead, they are likely to take an extended vacation, work on their own homes or properties, or even retire.

The last time we had a recession that affected remodeling in the Bay Area was 1989-1994. Our recession hit here later than the rest of the country and lasted longer.

There was very little work to be had and lots of competition from builders, who were also out of work and coming in from the Central Valley in droves.

I went back to school and learned how to use AutoCAD and run a computer, in 1991, during the worst of that period. Certainly better than twiddling my thumbs waiting for new customers to come into the cabinet department of the company that employed me.

Many of the best remodeling contractors retired, and lots of new blood was introduced as younger contractors filled the vacuum. The experienced contractors never really dropped their prices, they were just replaced by inexperienced contractors.

We are far from that situation now. High-end remodeling is still going strong and keeping vendors above water.

But there are signs we could be heading in that direction: A few local vendors are going out of business. The middle class (my clientele) has pretty much stopped remodeling as they watch their 401Ks and home values fall.

On the other hand, there are a whole bunch of newly minted homeowners buying foreclosed properties at the new lower market prices, most of which need remodeling. Those new homeowners also have equity, because they had to pay substantial down payments to buy with credit frozen the way it has been.

That bodes well for the future of remodeling in the Bay Area.

We'll see what happens next...Tomorrow Obama is inaugurated.

Peggy