February RC Luncheon

Thank you to Chelsea Audio Video for hosting our group!

Chelsea Team

Spring Home and Garden Show

See what RC Members are up to out at the Spring Home and Garden Show going on this weekend.

Tour of Remodeled Homes Booth

Steve Stolze, SLS Custom Homes early morning television interview.

Stanley Home Renovation & Design booth.

National News: Home Remodelers Lower Their Market Expectations

Remodelers perceived weakening demand for current and future residential remodeling jobs in last year’s final quarter, according to the latest NAHB Remodeling Market Index (RMI).

The RMI’s current market conditions indicator slid to 27.7, down from 33.5 in the third quarter, while future expectations plummeted from 27.7 to 19.6. Both readings were historic lows for the index, which was started in 2001.

Any number over 50 indicates that the majority of remodelers view market conditions as improving. The RMI has been running below 50 since the final quarter of 2005.

“During the last quarter many remodelers were wondering if their phones were still working because they received virtually no calls for work,” said NAHB Remodelers Chairman Greg Miedema, CGR, CGB, CAPS, a remodeler from Tucson, Ariz. “The jobs we are getting are for smaller projects and necessary home maintenance.”

Compared to the previous quarter, the 2008 fourth quarter RMI showed market conditions for major additions and alterations declining from 29.4 to 20.2, while conditions for minor additions and alterations dropped from 38.5 to 33.5. Maintenance and repair fell from 30.9 to 27.6.

Overall, major additions and other large remodeling jobs have experienced a greater decline than smaller remodels and maintenance.

“Remodelers suggest that the huge decline in consumer confidence, volatility in the stock market and uncertainty about the future of the economy have resulted in home owners delaying remodeling decisions,” said NAHB Chief Economist David Crowe. “Consumers are waiting to see conditions improve before committing to home improvement spending.”

All the RMI measures of future expectations in the remodeling market — calls for bids, amount of work committed for next three months, backlog of remodeling jobs and appointments for proposals — were down in the final three months of last year.

Expectations for the remodeling market slipped in all regions of the country during the fourth quarter — from 32.9 to 24.9 in the Northeast, from 31.5 to 30.7 in the South, from 36.2 to 28.0 in the Midwest and from 36.1 to 25.0 in the West.

Expanded Energy Tax Credit to Boost Demand for Renovation Jobs

Beefed-up tax credits for energy-efficient home improvements in the new economic stimulus package are expected to help increase demand for green renovation projects this year and next.

The Internal Revenue Code Section 25C for existing homes, which had expired at the end of 2007, was reinstated as part of the economic rescue package passed by the Bush Administration last fall. Installing energy-efficient windows, doors, roofing and insulation as well as furnaces, air conditioners and heat pumps all qualified for the credit.

But remodelers found that the terms of the 25C credit — equal to only 10% of the cost of each product and with a lifetime cap of $500 — weren’t quite strong enough to get enough home owners off the fence and into a contract.

Under the stimulus legislation signed by President Obama, the percentage of the cost and lifetime cap have been tripled to 30% and $1,500, respectively; the list of eligible improvements has been expanded and the deadline for installing them has been extended through the end of 2010.

The newly expanded tax credit also is in alignment with industry research showing that remodeling and retrofitting the nation’s older homes will have a far more significant impact on reducing residential energy consumption than meeting even the most aggressive efficiency goals for new homes, according to Greg Miedema, CGR, CGB, CAPS, chairman of NAHB Remodelers.

“These new tax credits are another way that the home building industry can combat the potential effects of global climate change by encouraging home owners to make energy-efficient improvements to their homes,” said Miedema.

A 2008 California study showed that homes built before 1983 were responsible for 70% of the greenhouse gas emissions related to single-family envelope energy consumption.

The study also found that spending $10,000 to retrofit a 1960s home could save 8.5 tons of carbon at a cost of $588 to $1,176 per ton, depending on existing tax credits and incentives. By comparison, increasing the energy efficiency of a new home 35% over current state requirements would cost about $5,000 and would reduce emissions by 1.1 tons at a cost of $4,545 per ton.

The bottom line is that retrofitting existing homes with energy-efficient features is four to eight times more carbon- and cost-efficient than adding further energy-efficiency requirements to new housing, the study showed.

Tax Credit How-to

Details on qualifying improvements are expected to be available soon on the IRS Web site.

Remodelers should familiarize themselves with the model types and products that qualify for the tax credit so they can advise their customers. However, they do not need to give their clients the product sales receipts to verify the claim. Certification statements in the manufacturer’s product information may suffice.

Home owners can claim the 25C credit on Form 5695 when they prepare their income tax returns. They should also retain records that include:

* Name and address of the manufacturer
* Identification of the component
* Make, model or other appropriate identifiers
* Statement that the component meets the 25C standards
* Climate zones for which the criteria are satisfied
* Additional information for storm windows, if applicable
* A declaration that the certification statement is true

National News: Home Improvements Weak, But Future Holds Opportunity

A growing number of home builders are diversifying into remodeling hoping to find jobs to tide their businesses over until the home buying market returns, but remodeling over the short term continues to display weakness of its own as home owners pull back from major improvements to their property.

Economists at last month’s International Builders’ Show in Orlando noted that consumers have lost significant amounts of both confidence and wealth and are not in a spending mood. Even for most remodelers, who haven’t taken as much of a drubbing as home builders, the goal will be to survive another difficult year as they prepare for opportunities that will emerge on the other side of the recession.

The Leading Indicator of Remodeling Activity from the Joint Center for Housing Studies of Harvard University projects that home owner improvement spending will be declining at an annual rate of 12.1% by this year’s third quarter, moving to $109.5 billion. Home owner spending on improvements peaked at an annual rate of $141.9 billion in the second quarter of 2006.

The market has seen steady declines since the middle of 2007, although recently the rate of decline has flattened, the Harvard index shows. “While we may be nearing the bottom of the remodeling cycle, there is little to push spending back into a growth phase until the economy recovers,” said Kermit Baker, director of the Joint Center’s Remodeling Futures Program.

Expenditures on owner-occupied units were responsible for 84% of the remodeling market’s $326 billion in activity in 2007. Improvements — as opposed to more routine maintenance and repair — accounted for 70% of the total.

“Despite the gloom today, remodeling is still viable,” said William Apgar, senior scholar at the Harvard Joint Center, even in the absence of conditions favorable for upper-end discretionary jobs. Expenditures in that category grew 23% in 2005 and 7% in 2007, compared to 13% and 6%, respectively, for total remodeling activity.

While the current remodeling downturn is more severe than in previous cycles, the industry is performing notably better than home building. As of the third quarter of last year, home improvements were down an estimated 15.5% compared to a far steeper 52.6% slump for single-family construction.

A new Joint Center study, “The Remodeling Market in Transition,” notes that exterior replacements, system upgrades and disaster repairs — which vary little from year to year — are creating a floor for spending in the home improvement market.

“While upper-end discretionary projects are responsible for most of the volatility in home owner spending, even at their inflated 2007 share, these projects accounted for 30% or less of total expenditures,” the study says. “As a result, even if some discretionary projects were deferred and others were downsized, the impact on overall remodeling expenditures would be much more modest than the decline to date on the construction side.”

Apgar cited the decline in home equity, a major funding source for projects, as a significant factor behind the remodeling slowdown. From its recent $12.5 trillion peak in the final quarter of 2005, owner equity in household real estate has declined by roughly $4 trillion, or almost 32%. Even so, this “will stabilize,” he said. Home owners “still have equity of $8.5 trillion, a lot of wealth,” he said. “But people want to see where the end is before they commit.”

Another drawback for remodeling is the current slowdown in home sales; existing home sales were off nearly 30% in the third quarter of 2008 from their recent peak. “New buyers engage in a lot of remodeling activity,” Apgar said. “The patterns of recent buyers are different from longer-term owners.”

According to the Joint Center, households that relocate spend an average 20% to 25% more on improvements than otherwise similar households that do not move.

Apgar also observed that “there has been a definite decline in the past four to five years in the likely recovery of remodeling expenditures when the house is sold.” During the peak of the boom, some remodeling projects actually increased the selling price of the house by more than $1 for every $1 spent. Average cost recovery declined steadily from 87% in 2005 to just over 67% in 2008, according to Remodeling magazine and the National Association of Realtors®.

The share of cost recovered from home improvement projects typically increases when house values are rising and decreases when values are falling, says the Joint Center report.

The good news, Apgar said, is that those who do make it through another difficult year can expect to have some strong fundamentals on which to build new remodeling business.

The new Joint Center report identifies three sources of demand that are most likely to boost improvement spending once a remodeling turnaround begins to materialize:

• The increasing need to upgrade the rental housing stock. “Years of underinvestment have left the nation’s rental stock, at an average age of 36 years, in desperate need of improvement and repair,” said Baker. In 2007, almost 10% of rental housing — more than 3.6 million units — were structurally inadequate.“The poor condition of the rental inventory reflects years of neglect,” the study says. While expenditures on the owner- and renter-occupied stock moved in tandem throughout the 1970s and 1980s, their paths began to diverge in the early 1990s. “Average per unit improvement and maintenance expenditures for rental units fell by almost 40% in inflation-adjusted terms between 1990 and 2007, while expenditures on owner-occupied units increased by almost 30%.”

  Spending will be focused on replacements and system upgrades, as well as maintenance, the study says. However, current housing market conditions are likely to delay the process of significant reinvestment in the rental stock. For the time being, the glut of vacant for-sale units that have at least temporarily been converted to rentals is reducing rents and dampening the demand for older units, “discouraging rental property owners from making improvements in the near term.”

• Ongoing growth in the immigrant home owner market. “Foreign-born home owners, who currently account for more than 10% of home improvement spending, are heavily concentrated in their 30s and 40s, ages when families are growing and changing the use of their home,” Baker said.“Immigrants are key to the future growth of the U.S. home improvement industry,” according to the Joint Center report. “In 2007, foreign-born households spent about $23 billion on improvements on their homes. Their spending levels have grown almost 13% per year since 2000 — well in excess of the 7% among the domestic-born population.”Immigrants are concentrated in gateway cities along the California coast, in Texas and southern Florida and along the Northeast corridor, the study says. “In these high-cost housing markets, owners devote a relatively large share of their incomes to home improvements. In the 12 metropolitan markets where foreign-born home owners spent at least $500 million on home improvements in 2007, the immigrant share of expenditures was well above the national average of just over 10%. In five metro areas — Houston, Miami, San Diego, San Francisco and Washington, D.C. — immigrants contributed more than a quarter of all remodeling expenditures.”

  The report also notes that immigrants have dispersed to an increasingly broad array of housing markets.

• Emerging interest in sustainable remodeling projects. “If we are going to meet the nation’s energy goals, we have to continuously search for ways to improve the residential built environment,” said Mohsen Mostafavi, dean of the Harvard University Graduate School of Design, where attention to green design is a growing focus in the classrooms and studios. “Maximizing energy-efficiency in existing housing may be one of our greatest challenges, but also one of our greatest opportunities. Consumer demand for sustainable design is on the rise. Architects and planners can lead the way in devising appropriate solutions.”In 2007, home owners devoted more than $52 billion of their improvement expenditures to energy-related projects such as replacing appliances and lighting systems, upgrading their HVAC systems and increasing insulation — up from less than $33 billion in inflation-adjusted terms a decade earlier, the study says.“Motivated by broader environmental concerns, consumers have demonstrated a growing interest in products and projects that meet additional green goals: quality and durability, environmental performance, and safety and disaster mitigation,” the report says.

  In a survey, the Joint Center asked full-service remodelers how frequently they installed green products that met at least one of these criteria, focusing on 10 products listed by the Partnership for Advancing Technology in Housing as having the “most promise for making our existing homes more durable, stronger and more resource-efficient.” The respondents indicated that they were no more likely to install energy-efficient products than products promoting the other goals. About 40% said they regularly or occasionally installed products in each of the four categories. “Some products with energy-saving properties, such as high-performance windows, were used almost universally, while others such as tubular skylights had not yet penetrated most markets.”

  To gauge future trends, the survey also asked the contractors to identify products for which consumers have expressed increased interest. “Here again,” the study says, “there were no major differences between products promoting energy efficiency and those meeting other green objectives.” However, there were wide differences in interest in specific products within each category. For example, among energy-efficient products, “more than 80% of contractors noted greater consumer interest in compact fluorescent lighting, but only half saw greater interest in wireless lighting and temperature controls.”

The Joint Center also notes that when housing markets recover, foreclosed properties will provide opportunities for home improvements. Banks and new owners will renovate and repair these properties and state and local governments will make use of the Housing and Economic Recovery Act of 2008, which allocated $4 billion for the redevelopment of abandoned and foreclosed properties.

Despite today’s downturn, the Joint Center reports that, “Remodeling still rests on a solid foundation with 130 million homes — and one to two million added yearly — in continuous need of maintenance, upgrades, repairs and adjustments to meet the nation’s changing preferences and lifestyles.”

Mixed Dry Waste Disposal Changes

On January 1, 2009, key changes to requirerment for the disposal and processing of all mixed dry waste (consisting primarily of construction and demolition debris) generated in the Metro region went into effect and may impact the way you do business.

Learn more here.

2008 Remodeling Excellence Awards

The Remodelers Council of Metropolitan Portland is pleased to announce the 2008 Remodeling Excellence Award winners. Sponsored by Contract Furnishing Mart/ Stainmaster Carpets, the Remodeling Excellence Awards recognize outstanding work throughout the remodeling industry.

“It is important that we take some time each year to applaud the individuals and companies who lead our industry though their efforts,” said Steve Frazier of Contract Furnishings Mart. “We were proud to have so many difficult decisions to make while judging submissions. The Portland area’s remodeling industry is home to some amazing talent and some outstanding professionals.”

Remodeler of the Year: Scott Gregor, President of Master Plan Remodeling  With 36 years experience, Scott Gregor has assembled a team of experts that consistently create award-winning remodels for Portland/Vancouver homeowners. Master Plan provides complete in-house design services and Wood-Mode Cabinetry.

Ten years ago, Scott joined other remodeling industry leaders like Tom Kelly, Lee Zajic, Lora Creswick and David Ewing to help found the HBA Remodelers Council.  Through the years the Remodelers Council has continued to grow and is now the third largest Remodelers Council in the United States.  While his involvement started ten years ago, he is still very active today.  In 2008, Scott served on the RC Steering Committee and the RC Programs subcommittee.  He served as Chair for the 2008 Tour of Remodeled Homes and also was one of the Tour participants.   He also served as one of the judges last year for the Remodeling Awards program with the Twin Cities HBA – part of a partnership we have to help elevate the awards program of our HBA.

Scott cares passionately about his work, his family, his integrity and his customers.  He brings that passion to his leadership in the RC.  As the old saying goes, iron sharpens iron, and Scott brings his high standards and drive to help push the RC and the HBA to excel. 

Trade Contractor of the Year: Quadrant Systems  Quadrant Systems has been in business for twenty years and its owner, Gary Nedelisky, is a long-time supporter of our industry and the HBA.  Quadrant has been an HBA member for over eight years and is also an active member of the Remodelers Council.  The company has supported builders in the Street of Dreams for over 15 years and has also contributed auction items to the Home Builders Foundation.  Last year, Joe Ness and Curt Nelson, both active in the HBA in a variety of areas, served as the Chair and Vice-Chair of our Membership Council, providing strong leadership in a very tough year. 

Other Excellence Award Winners:

Whole House Remodel Under $250,000   
Highland Ridge Custom Home Remodeling

Whole House Remodel $250,000-$499,999 
Cascade Restoration & Remodeling

Whole House Remodel $500,000-$999,999 
BC Custom Homes Corp.

Whole House Remodel over $1,000,000
Metke Remodeling and Woodworking

Kitchen Remodel Under $100,000  
Craftsman Design & Renovation

Kitchen Remodel $100,000 and above 
Neil Kelly Design/Build Remodeling

Bathroom Remodel under $50,000  
Metke Remodeling and Woodworking

Bathroom Remodel $50,000 and above 
Yalecrest Homes

Master Suite Remodel    
Cascade Restoration & Remodeling

Exterior/ Outdoor Living/ Deck Remodel 
Metke Remodeling and Woodworking

Open Category    
Neil Kelly Design/Build Remodeling

Interior Design and Project Designers

Residential Bath Design   
Fuller Spaces

Residential Kitchen Design   
Paolo Design Group

Residential Whole House Design 
Z-3 Design Studio Inc.

Tom Kelly Awarded Lifetime Achievement Award

Members of the Home Builders Association and Remodelers Council of Metropoltian Portland gathered yesterday to award Tom Kelly of Neil Kelly Design/Build Remodeling the prestigious Building Excellence Lifetime Achievement Award.

Tom Kelly’s influence on housing, the remodeling industry, and communities and people in general is amazing.  In 1980, he took over the operations of a successful remodeling company founded by his dad, who was also a legendary remodeling and housing pioneer in our region.  He’s built that into one of the most well-known and successful remodeling businesses, not just in Portland, or even Oregon, but in the entire Country.

While the number of accomplishments, awards and recognition Tom has received would fill pages, there are a few areas that stand out as reasons why he is so deserving of this award from our industry.

He has certainly been an active and involved member of the HBA.  He has served on the HBA Board of Directors, as an HBA Officer, and was HBA President in 1996 – the first remodeler to hold that position.  His company has participated in many of our Tour of Remodeled Homes, has been supportive of HBA events and activities, and has numerous employees and staff serve on HBA committees, councils and Task Forces.
 
Tom’s also not shy about taking action, especially if he thinks there needs to be a better vehicle built for working on industry issues.  He was one of the founders of HBA’s Remodelers Council – making sure the Home Builders Association had a strong venue for promoting, representing and advancing this fast growing segment of the construction industry.  He also is a founder of the Oregon Business Association, which started just a few years ago when Tom and other business leaders felt a different approach was needed to represent business at the legislative level.  OBA now has over 300 of Oregon’s top businesses as members.

He was green before green had a color.  His company has done more to innovate and adopt green building practices and the use of sustainable building materials than probably any in our region.  In 1997, his firm embraced the principles of the Natural Step – a way of approaching business that reduces environmental impact and increases efficiency.  In 2006, he built a net zero energy home, which actually produces more energy than it uses.  It was awarded the first LEED for home silver certification in the west coast.

Tom doesn’t rest on his laurels, nor is he afraid of making change.  He took what was already a successful local remodeling company and has expanded it to help diversify its business.  The company now also has a home repair division, a custom home division, a home performance division and an environmentally friendly cabinet company.

But no review of Tom’s accomplishments and contributions, no matter how succinct, would be complete without mentioning his heart for Oregon’s communities and others less fortunate.  Tom’s support and involvement goes to a wide variety of educational, environmental, and social service organizations including groups such as the Portland Children’s Museum, Volunteers of America, Providence Medical Foundation, the Oregon Solutions Project, Children’s Cancer Association, Columbia Riverkeeper, EarthShare and the Albina Rotary Neil Kelly Memorial Scholarship Fund.  And he’s continued his company’s 30 year active participation in Loaves and Fishes / Meals on Wheels, serving on the Board and chairing its fundraising committee.  For ultimately, Tom combines a strong spirit of pioneering and progress built on the respect for the legacy his father established.

February New Members of the Remodelers Council

Welcome new members of the Remodelers Council

• Paul Grimstad,  Efficient Approach Inc.

• Robert Wood,  Mountainwood Homes, Inc.