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.
Faux pas? Even this year's best-bang remodeling project-replacing exterior siding with faux-wood panels made of fiber-cement-yields only an 88 percent payback, according to an annual survey by Remodeling. That said, the relative price of the more durable fiber-cement siding has fallen dramatically in recent years compared with that of vinyl and wood. And with a total cost of only about $13,000 for an average-size house, "it's a smart thing to do if you want to make a good first impression when a buyer drives up," says Jim Cory, editor of Remodeling's sister publication, Replacement Contractor.
Not that such calculations played into Roy Greene's reasoning for redoing the wood siding on his house in San Antonio. "My wife had been bugging me to repaint it, so I said, 'OK, uh, let's just have it replaced,'" says the retired Air Force colonel, who also appreciates the added benefit of better insulation. "So I'm lowering my heating bill, too."
Of course, there's another possibility for those trying to figure out how to get the most house for their money. "You can move," says Dan Fritschen, whose family's travails in deciding whether to remodel prompted him to create a sophisticated online calculator to weigh the competing options: remodelormove.com.
Indeed, after plugging in the costs of moving versus redoing their house to fit a growing family, Earle Chapman and his wife decided to punt on the major remodel they'd first planned. Instead of taking out a home equity loan and spending $60,000 or more on a second story, "we just dressed up a sow's ear and made it presentable for sale," he says of their decision to move to a bigger house.
Talk about a smart money move.
This story appears in the December 11, 2006 print edition of U.S. News & World Report.