Remodeling Outpaces New Home Construction

Local opinions are mixed as to whether a turnaround will come any time soon

by Bill Mintiens for the Central Oregonian 

The National Association of the Remodeling Industry (NARI) believes consumer confidence this year could signal a more sustained recovery for the industry around the country.

Representing 63,000 remodeling contractors nationwide, the NARI is the only trade association dedicated solely to the remodeling industry.

“There are clear indications that some of our NARI members believe that they have weathered the storm, and expect consumer confidence to return in a more consistent pace going forward,” wrote Kevin Anundson, NARI National Secretary.

Citing a national survey conducted by the NARI during June of this year, the report concluded that the most important factor driving positive expectations in the industry is pent-up demand from homeowners.

Other factors include low interest rates and improving home prices throughout many regions of the country.

Basically, consumers believe their home values can’t sink any lower and, if they don’t have to sell, they might as well take advantage of low interest rates to update their homes.

“Many homeowners have made the decision to remain in their home and are choosing to make improvements and increase their long-term living accommodations. This thought process allows them to be much less concerned about returns on investment and resale values,” wrote Anundson.

Here in Central Oregon industry optimism is mixed with a fair amount of caution.

Tim Knopp, Executive Vice President of the Central Oregon Builders Association, shares NARI’s perspective.

“Generally in 2012, in the Central Oregon remodeling market, there’s more optimism than in 2010 or 2011. There’s more activity and jobs being bid but they tend to be smaller projects,” wrote Knopp.

Mike Davis, owner of TMT Home Remodelers based in Redmond, is more cautious in his optimism.

“I’m cautiously optimistic. But I’ve seen ramp-ups like this (in the economy) before and I’ve learned to wait to see what happens before making any moves. The last job we had in Crook County was a couple of years ago so we don’t have anything going there right now. I believe the recent economic situation has forced Crook County residents to be much more conservative with their remodeling projects,” said Davis.

Marshall Bex, a general contractor who’s been working in Prineville for 30 years, feels the tide is starting to turn.

“I think work has picked up over last year but not drastically. And I do think it’s going to loosen up more the rest of this year because people with money are tired of waiting for the economy to get better, they’re not going to wait any longer,” said Bex.

Clint Brooks, owner of Clint Brooks General Contracting based in Powell Butte, cites both existing home inventories and the challenge of obtaining financing as the reasons for the slow building recovery.

“The problem is that a lot of the people who want to build have to sell something first, which has made that pool of clients stagnant. And there’s still a large inventory of short sales and foreclosures which gives people options, they don’t necessarily have to build or remodel. And the banks are slow on lending which also hurts new business. I believe it will get better but not right away,” said Brooks.

“We do have a lot of inventory in the $150,000 and above price range but not much in the under $150,000 because there are multiple offers on those. A lot of owners are just sitting back and doing nothing to their homes because of the economy. Or they’re doing minor things to make their homes more sellable. I believe people are getting more confident about the economy, they feel prices are now as low as they’re going to be,” said Bob Layne, Broker with The Associates Real Estate in Prineville.

Locally, a review of permits granted over the last six months by the Crook County Community Development Department reveals a year-over-year increase from 2011.

Residential renovation/addition permits increased thirty-two percent for the six months ended July 31st 2012 over the same period in 2011 (29 versus 22 in 2011.)

On the other hand residential new construction permits are less than half for the same time period (10 versus 22 in 2011.) This may reflect the inventory situation cited by Bob Layne and Clint Brooks.

Commercial “new or addition” permits for buildings less than 4,000 square feet are slightly down for the first half of 2012 compared to 2011 (eight versus nine.)

Compared to pre-recession years these permit numbers may seem low but officials view this as the “new normal.”

“I think this is probably a more normal norm (the pace of permits),” said Lou Haehnlen, Building Official with the Crook County Community Development Department.

Haehnlen believes it’s all about confidence.

“Consumer confidence is returning and I think it’s because of our data centers. People see what the data centers are building here. It’s helping our economy because of all the guys working to build these centers. All these workers are living here and shopping here. People see that and it’s helping confidence,” said Haehnlen.

Bill Zelenka, Community Development Director with Crook County, notes that both Facebook and Apple are not just building – they’re also remodeling existing buildings.

“Remodel-wise, both Facebook and Apple have leased buildings and are doing remodels on them,” said Zelenka.

Both Haehnlen and Zelenka cite the “halo” effect that the data centers are having on commercial vacancies in Crook County.

“Commercial-wise, buildings that have sat vacant for years are now being rented again, I think, because of the data centers. And not just up on the hill, even downtown we’re seeing new businesses,” said Haehnlen.

Hopeful indicators for an industry hit hard in Crook County.