Thursday, January 19, 2006

Contractors Beware

Since house prices have risen so much so quickly over the past few years, it probably shouldn’t be much of a surprise that home remodeling has become such a huge business. If the price of your house is up 100% in five years, then it would seem like a prudent economic decision to borrow some of the value of the house and invest in a new kitchen (with granite counter tops no less) if you did not want to necessarily sell the house and move to a new one (with a kitchen with granite countertops). According to the WSJ, plenty of people did this in 2003 and 2004 but this type of activity slowed down in 2005. It will be interesting to see what happens to the home remodeling industry and all of those unresponsive contractors in 2006.

This article reminded me of all the complaints I have heard about contractors over the past few years. It seems like everyone I know who decided to put more than $2000 into fixing up their house had a bad experience with a contractor. I’m looking forward to a day in the not too distant future when contractors aren’t so busy that they can return a phone call within three days of calling or showing up for work on the day they said they would be there.

From Today’s Wall Street Journal (No Link)

“After years of high prices and work backlogs in the $150 billion home remodeling market, a slowdown in business is pushing some contractors to offer perks and discounts to their clients for the first time in ages.

This month, S.R. Crowley Contractors, a Lewiston, Maine-based firm, began offering a 10% total discount on all jobs. The president of Harmony Kitchen & Bath, outside Ann Arbor, Mich., now makes himself available to meet clients on evenings and weekends. Recently, Bachmann Construction, in Madison, Wis., started giving clients free schematic drawings and more detailed estimates -- services that normally costs up to $2,000.

The incentives reflect a recent slowdown in spending on home remodeling. Spending rose just 4.3% in 2005 compared with 2004 levels, which increased nearly 20% from 2003, according to estimates from Harvard University's Joint Center for Housing Studies. The center expects growth to stay in the single digits for 2006 as well. The most recent data from the U.S. Commerce Department is even starker: Spending was actually down 4.1% in November from the month before.”


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Wednesday, March 01, 2006 3:57:00 PM  

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