Remodeling resurgence boosts sales for contractors

NEW YORK (AP) Glenn Bridges can tell that the market for home remodeling is picking up when he's hanging cabinets or laying a floor in a customer's house, a next-door neighbor is bound to knock on the door and ask if he's available for another project.

They'll look at his handiwork and then say, "we have something we're interested in doing," Bridges says. "It's quite uplifting."

The collapse of the housing market decimated business for contractors like Bridges, most of whom are small businesses with just a handful of employees. But many are seeing business improve as home sales slowly recover and homeowners who had put off projects during the recession are feeling better about the economy. Still, the improvement is gradual and projects aren't typically as lucrative as they were back when homeowners were able borrow against a large amount of equity in their houses.

Bridges was so optimistic about the remodeling market that in February that he restarted the contracting business he was forced to shut down in 2007. When he closed, he had to lay off his three full-time workers. But at the start of 2012, things began to change.

"I had people that needed work done and all in one weekend they said to me, 'why don't you help me ... why don't you get active again?'" says Bridges, owner of Eagle Ridge Contractor Services in Naples, Fla. He had spent the intervening years working on projects with other business owners.

He's worked steadily since February, installing new kitchens and bathrooms that range from $10,000 to $25,000, depending on the size of the room and the quality of the cabinets and appliances. He hired one full-time worker when he started his business again and says he may take on as many as three more if business is good enough. And he's optimistic that it will be, because he's getting more requests for bids on projects. "Where I was pricing one or two (projects) a month, I might now price five or six a month. And I think I'm not unusual for our market, there's more optimism."

Bridges isn't alone. Sales of previously occupied homes are up more than 9 percent this year, and spending on residential construction has risen 16 percent. People who track housing trends see signs that remodeling is on the rise and that the improvement will continue. Harvard University's Leading Indicator of Remodeling Activity suggests that annual homeowner improvement spending could rise 12.2 percent in the first quarter of 2013, up from levels reached in the first three months of 2012.

Some of the uptick is coming from new homeowners fixing up and some is coming from people who put off work during the recession.

"Even though it's a down market, homeowners are always having to do certain projects roofing, siding, heating systems," says Abbe Will a research analyst with Harvard's Joint Center for Housing Studies. "When we're moving into a recovery phase, we're going to be looking to the discretionary projects, like kitchen and bath remodeling. We're expecting to see lots more of that as the housing market stabilizes."

But while the upturn is encouraging, it hasn't yet turned into the boom that some had hoped for. After rising from a low reached at the end of 2008, remodeling activity rose sharply but then fluctuated since the end of 2009, according to the National Association of Home Builders' index of remodeling activity. It's "improving, but not as much as we thought it had been earlier," says Steve Millman, director of economic services at the NAHB.

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Remodeling resurgence boosts sales for contractors