By Diane Dietz, The Register-Guard, Eugene, Ore.
Oct. 12--Homeowners attending the Lane County Home Improvement Show this weekend are getting royal treatment from contractors who are hungry for work.
In a faltering economy where construction of new homes has plummeted, workers in some building trades are having to rethink their jobs.
Local builders who for years made a living constructing new homes have for the first time this year rented booths at the Lane Events Center to try a lesser grade of work: remodeling jobs. Longtime remodelers, meanwhile, have downscaled to home maintenance and repair. It's all aimed at keeping employees on the payroll and the balance sheet in the black.
"Everybody starts to think: I need to take smaller jobs. I need to return calls faster," said Karen Ramus, who has organized the home show for two decades. "They're saying, 'OK, where is my future in this business?'"
The stock market plunges of last week bruised people who had already been slapped about for months by flat or declining home prices and a sharp reduction in construction volumes.
The number of construction permits issued for building new homes in Eugene-Springfield fell by nearly half from 2005 to 2007, and the trend continues downward this year, city figures show. Meanwhile, remodeling jobs grew in Eugene-Springfield in that two-year period, but those numbers then began to fall and were down 12 percent by the end of the third quarter this year.
The stark trend hit the Lane County home show in an alarming way in the past month, Ramus said. Eight of the home show exhibitors dropped out -- and they did so past the 30-day deadline to get a refund on their booth rental.
Proprietors gave Ramus a range of explanations, from the high cost of transporting displays to layoffs that displaced their booth organizers, she said.
"Things started to hit the fan," Ramus said. "It's a strange economy when someone's paid in full and they can't go in your show."
Strange may be one word for it. Desperate may be another.
Homebuilder Tom Walter's new-home construction business has morphed into a remodeling company over the past year. "The market is really gone for the subdivision builder right now. Our structure had to change," he said.
Before, Walter Custom Homes had a dozen full-time employees filling fields around Eugene-Springfield with houses, Walter said. Now, he has four employees who oversee independent craftsmen doing remodeling projects -- and even doing some of the work themselves.
Walter is not alone. Longtime local builder Mike Gansen, too, is leaning into the remodeling trade.
Walter has worked more than 30 years in new-home construction, earlier for the Meltebeke family and now with his own firm. He hopes to do remodeling projects for many of his past new-home customers.
"I can market just to them and create enough business to weather through until home building is a little better," he said.
Ramus saw homebuilders shift en mass to remodeling in Lane County once before -- three decades ago when she was helping her mother, Helen Berg, who started the local home show.
At that time in the late 1970s, the Oregon economy was plunging into a deep and prolonged recession as the national housing market went sour and Oregon's mainstay industry -- lumber and plywood mills that fed America's construction market -- fell on hard times.
The hunger for remodeling work is a sharp turnabout from recent times, Walter said. "There was a period several years ago when people couldn't get sheet rock hung in their houses, there was such a shortage of labor.
Now, there's high quality labor to go in and do remodeling and renovation work."
It's an adjustment, though, Gansen said. "The projects aren't long. The profit margins aren't as good as new construction was, but I shouldn't say that, really. Work is work."
The conventional wisdom that remodeling takes off when new-home construction slumps turns out to be more wishful thinking than reality, according to a recent report by Harvard University's Joint Center for Housing Studies.
Researchers compared new construction cycles with remodeling cycles for the past 20 years through two recessions and found the cousin industries rise and fall together, study author Abbe Wills said.
"Once home building turns down, remodeling tends to do the same just a couple of quarters later," she said.
Nationally, homeowner spending on remodeling and repairs will fall at the annualized rate of 4 percent to 11 percent through the end of the year, according to the Harvard researchers and, separately, the National Association of Homebuilders.
The homebuilders do not expect recovery to 2007 spending levels until 2010.
"We're not seeing signs of improvement -- not even really signs of leveling or stabilizing. It's definitely not looking good," Wills said.
"It's hard news to hear and hard news to give, but that's what we're seeing."
Local remodeling firms aren't inclined to quibble. Neil Kelly Co.'s Eugene branch is likely to see a 25 percent year-over-year decline in sales, designer Matt White said.
Customers are slower to sign contracts, several remodelers said. They're dialing back their ambitions. They're anxious about falling home values.
They're shopping around for savings.
"The market definitely is more competitive now than it's been in the past four to seven years," White said. "It used to be (companies) who were good could basically set their price."
Remodeling permits are down, and so are the type of projects that homeowners are commissioning, said Steve McGuire, construction plan review supervisor for the city of Eugene.
"We're not seeing the really, really large remodels," he said. "We're seeing smaller additions and smaller remodels -- maybe they're remodeling the kitchen area and opening up a wall."
Page Remodeling & Construction is having its best year ever with two major projects that kept its crews going since last winter, but the future is less certain.
"This will be the test to see how we do," said Diane Page, who with her husband, Chris, was setting up the company booth at the home show days ago.
One aspect of the remodeler's domain that resists economic declines is repair and maintenance work, the Harvard study showed, and some firms are bolstering that strength.
In Eugene, Rainbow Valley Design and Construction, for instance, has created a small projects team to try to keep all their employees working, said Chip Radebaugh, Rainbow's assistant general manager.
The team races around town in a van full of tools and ladders hanging pictures and mirrors, repairing dry rot, repairing tile and replacing grout, and even demossing roofs.
The nation's economic troubles caused an unusually high level of circumspection among home show vendors this year, Ramus said. The sports chatter is minimal; discussion of survival strategies is dominant, she said.
"A lot of us get up every day and go through the motions and do a great job at our job, but we don't think about: Will this be here tomorrow?" she said. "(Businesses) have to think about: 'Hey, what if this doesn't work anymore? How do I become essential to people?'"
So, a vendor who sells granite countertops is diversifying into a line of water-sparing toilets. A commercial woodworker and master craftsman brought his finely made cutting boards to sell at the home show.
But not all businesses will escape the down cycle, Walter said.
"It weeds out the people who are undercapitalized and doing shoddy work," he said. "Through a period like this, the better organization will survive. The people with better reputations who take care of their customers will survive."
All the builders and remodelers are closely honing their business practices -- especially when in the unfamiliar territory of smaller jobs.
It takes practice to get the bidding right, Rainbow Valley's Radebaugh said. "They're less expensive jobs, so you need to do them more efficiently."
Radebaugh said Rainbow Valley tried to slowly and quietly institute its handyman service in the past three months. But demand was much higher than anticipated, he said.
The company is scheduling work two or three weeks out. It's preparing a second van to keep up with the smaller jobs. "It's trial by fire right now because it's taking off," Radebaugh said.
The companies are trying to convince their customers that now is the time to remodel. With the stock market in such bad shape, White suggests, money is safer plowed into a property project.
But, like stocks, home prices can be volatile too, as the current national and local property price slumps show.
Some investment advisers counsel caution. A real estate price rebound to cover the cost of any improvements is not guaranteed.
Despite tight credit for new construction, homeowners can still refinance their homes to take out equity for remodeling, said Rhonda Stickney, loan officer at Madrona Mortgage in Eugene.
If homeowners owe less than 80 percent of their house's value -- less than $160,000 on a $200,000 house, for instance -- they can refinance, for the moment, and get a 30-year fixed rate mortgage with an interest rate of 6.12 to 6.25 percent, she said.
"Lenders are looking for stability. We find stability when we can document your income, see you have the ability to save and we see you can afford the payments," Stickney said.
"We've done quite a few refinances in the last six months for (renovations)," she said. "People are choosing to stay in their homes, make the improvements and ride out the market a little bit."
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