Home remodeling picks up as economy mends

San Jose Mercury News (MCT)

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SAN JOSE, Calif. _ In another sign of an improving economy, residential remodeling is picking up after several lean years, helped along by homeowners who are deciding to fix up places they can’t sell because of the housing crunch.

“There is an awakening,” said Rick Evans of Bauman Builders in San Jose. Last year “was like a switch that flipped,” he said.

The National Association of Home Builders forecasts residential remodeling expenditures for owner-occupied improvements will increase nationally by 8.9 percent in 2012 and another 11.4 percent in 2013. An index of remodeling contractors’ confidence is at its highest level in five years, according to the association.

“Home remodeling seems to be the one of the few areas where there’s any activity in the private construction sector,” said Brad Kemp of Beacon Economics.

The jobs are going to the last contractors standing, following a punishing three or four years in which the construction business drastically slowed during the recession and its aftermath.

Jennifer and Julien Schreyer are remodeling the kitchen of their Oakland, Calif., home, paying cash from savings and investments for the job.

“The economy is getting a little bit more stable, we are feeling a little more secure, and the stock market is going up a little so we could sell some stock,” said Jennifer Schreyer, a real estate agent whose husband works for Pixar. “The economy had a lot to do with it.”

The Schreyers have been waiting for the right time to redo the kitchen of the home they bought seven years ago. “It was a little scary to take those steps to do something substantial,” Jennifer Schreyer said, but a new kitchen was a lifestyle essential. “I must say, I love to cook; my husband is French; our two boys were born in Paris, and they love to cook,” she said.

Jim Tibbs of HDR Remodeling in Berkeley, Calif., which is doing the Schreyer’s kitchen, said business began improving in September. “People seeming to be staying in their homes longer, opting for improving the home they’re already in as opposed to selling and taking on a heavier mortgage at a larger home,” he said.

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Vickie Feeman is doing a major remodel of her Palo Alto, Calif., home, gutting parts of the interior, moving walls, putting in arched doorways and giving the 1920-30s house a Mediterranean feel. “I waited a long time to do it, for no reason other than getting around to it, finding the time to plan and decide.”

“We are seeing a renewed interest” in remodeling projects, said Ciro Giamonna, president of Harrell Remodeling in Mountain View, Calif., which is doing the job. “I think people are giving themselves permission to take the leap. The uncertainty is starting to clear a little.”

Donna Hecke and her husband, who works in high tech, have been remodeling their Almaden, Calif., home a little bit at a time, saving up the money for each project. “We don’t do anything until we have the money saved.” Next, an outdoor kitchen that will be done by R and R Development of San Jose, which has seen business increase in the past few months.

“The phone’s ringing a lot more now than it was a while back,” said Rob Gamble of R and R.

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But homeowners are spending more cautiously than they were before the crash, said National Association of Home Builders economist Stephen Melman. “The projects aren’t quite as robust. They’re looking for value, versus the big ticket projects during the boom.”

Some homeowners are paying cash because they have no equity to borrow against, he said.

“Instead of a whole new $150,000 kitchen, people will replace appliances and refurbish cabinets. They’re more likely to do the bathroom than kitchen because it’s less expensive,” Melman said.

“I think that those that survived had planned for it,” said Randy Dunn of Anchor D Construction in Concord, Calif. Dunn said he credits his survival partly to being a one-man business with a low overhead, and a willingness to take on any job during the downturn. “Anything to get the bills paid and some food on the table,” he said.

Kermit Baker, economist with the Joint Center for Housing at Harvard University, said unstable home prices are a brake on remodeling in many parts of the U.S.

“There are still a lot of markets where house prices aren’t settled, if not heading down. These folks still might be nervous about investing in their property,” Baker said. In those markets, investors fixing up foreclosures are a source of work. The government backed company Fannie Mae spent $600 million refurbishing foreclosures that needed significant repairs in 2011, Baker said.

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