Remodel That 1960s-Era Colonial
Prices for lumber, cement-and even contractors-have fallen sharply
When Earle Chapman first began crunching the numbers on the remodeling project he had planned for his house a year ago, the drywall he needed topped $13 a sheet. That is, if he could even get his hands on any.
A decade-long housing boom and a spike in rebuilding activity in the wake of Hurricane Katrina last year had stretched supplies of building materials like drywall and cement thin. And with delivery charges skyrocketing along with gas prices, the cost of materials for the average remodeling project had surged by as much as 50 percent in some places.
But when Chapman's project was in full swing this summer, wallboard had fallen back to about $6 a sheet, "and we found lots of other deals, too," the 45-year-old Denverite says of the spruce-up job he did on his home's kitchen, bathroom, and exterior, which he and his wife completed themselves for just $3,500 in materials. "I figure we probably saved about half" of what they might have shelled out a year ago.
This is the upside to the biggest residential real-estate slump in more than a decade: a steep fall in homebuilding activity that has eased supply shortages and reduced prices for commodities like plywood and framing lumber. They have fallen by nearly 25 percent over the past year, according to figures collected by Random Lengths, a newsletter that tracks lumber prices, and are expected to continue to soften through the first half of next year. Depending on the job and whether it's a do-it-yourselfer, remodeling experts say your remodeling project's overall cost could fall by 20 percent or more.
Even better, demand for the skilled workers who turn those materials into custom kitchens, bedroom suites, and bathrooms has also begun to slacken, reducing wait times from months to weeks for skilled carpenters, drywallers, and even plumbers, some of whom are lowering their bids to attract more customers and replenish their backlogs. "Things are definitely loosening up a bit," says Kermit Baker, director of the Remodeling Futures Program at Harvard's Joint Center for Housing Studies. "A year ago, a lot of contractors might have turned down the smaller jobs or just said, 'call me next spring,' whereas now they actually have to go out and drum up the work."
All this, of course, doesn't mean that kick-starting that remodel you've been dreaming about is a no-brainer. With real-estate prices down 10 percent or more in some areas and the market still softening, homeowners can no longer ride the appreciation wave. Soaring prices previously allowed them both to finance their dream kitchens with home equity loans and ensure that the money they dumped into a renovation came back in a corresponding increase in property value. Indeed, the latest surveys ranking the financial payback from home improvement projects suggest that even popular bathroom and kitchen remodels that have long topped such lists now return only about 80 cents for every dollar invested. "You're not getting the same bang for your buck," Baker says of projects that used to return 90 percent or more.