Trends for 2010 in the Construction Industry
(By Tim Clark)
How is the economy doing? It depends on who you listen to. Many are claiming the recession is over and things will be returning to normal soon. Others predict more doom and gloom. Many contractors are wondering because their business has been hit the hardest of all in this economic downturn. The real answer to the question is… it’s getting better and it’s still scary out there. There are some trends on the horizon to look for, in 2010, for all service professionals in the remodeling and construction industry.
Real Estate
Many are pointing to the rise in home sales during the course of the year. The problem is that many home sales are spurred by the home buyer tax credit, that the sales are of existing homes and not new homes, and that many sales are on foreclosed units. So the picture is not entirely rosy that home sales will jump back up to the frenzied days of 2006.
However, the total inventory of houses available for sale is being gobbled up. Depending on the location, new homes will need to be built to meet the demands. Construction jobs will return in the spring and summer but it will only be in certain areas of the country and it will not be as robust or consistent as in recent years.
There is good news for many in residential renovation and repair services. Many people who are staying put are living in homes that are aging and will need work. And those who are taking advantage of the first home buyer tax credit will be moving into homes that will require the services of local contractors.
Consumer Confidence and Jobs
It will be many years before there is a huge demand for the massive luxury renovation projects come back to most areas. Despite these home sales and the aging of existing homes, there is still a problem of tight credit for consumers and a lack of job security with the persistent news of American job losses. Recent reports of an increase in consumer confidence for November and December of 2009 are most likely buoyed by the holiday shopping season and not the real confidence needed to sustain economic growth.
After every recessionary period, there is a delayed reaction when it comes to new jobs. And many are predicting a jobless recovery, or at least a longer delay than normal for unemployment figures to subside. The unemployment figures are still showing that 10% of the American workforce is unemployed. Worse still is what the figures do not report: that many are still under-employed. Making matters worse are the news reports of these figures which further dampen the confidence of the consumer.
Until people with jobs are comfortable that they are secure, there are going to be hard times for the service professionals in the construction and remodeling industries. Jobs to bid on will come but they will be harder to find in many areas.
Trends in the Industry
There are a few bright spots for contractors for 2010. There is a pent-up demand for services and new products across the country. Credit reins will surely loosen as the year progresses. And if jobs start to come back, and just starting can be enough to ease consumer fears, near the middle of 2010 then homeowners and business owners will take on new projects. New government programs, such as “Cash for Caulkers”, could be a boon for the industry.
The recession has forced a lot of people to spend much more time in their homes. Many haven’t been able to “move up” to a new house, many have homes that are aging and require maintenance and repair, and many will be looking to expand and remodel once the banks open up their coffers again and credit is eased.
Baby Boomers have continued to age and most want to, and some have to, stay in their homes for years to come. Those who offer aging-in-place services to remodel homes will benefit over the next two years. Also, many families have been forced to bring in aging parents and will require these same services to accommodate older family members.
Despite a crashing economy, the strongest sector in the construction and remodeling industry over the last 18 months was the green products and services. People with healthy jobs and with job security continued to upgrade their homes with energy-efficient products and materials. Businesses can take advantage by looking for people who want to help the environment and save on utility bills. With many existing tax credits and certainly future incentives coming from this administration, people will be looking for the services of professionals who specialize in green technologies.
People will look to renovate kitchens and baths. But most will want to remodel for much lower prices. It’s going to help a service professional who knows of less expensive products and materials to use in those renovations to keep costs down. There will still be those $60,000 to $100,000 kitchen projects, but they will be few and far between. But contractors can set themselves apart when they can help remodel for $15,000 to $30,000 with alternatives to granite, custom cabinets and stainless steel appliances. And there will always be those bargain hunters who still want high-end projects for unattainable prices, but there will be a niche market for those middle-budgeted projects.
Stayed tuned to the ConstructionDeal.com website for more trends and ideas to improve your business in the new year.
Rate:
 35 |
|
Comments (12)
IMO the green movement is overrated and the people who would be willing to participate are generally in an income bracket that will hold back and not spend rather than spending the extra money to go green. The people who do have the means will put their money where they find the most quality and greatest value period.
Clearly Mr. Perkins is misinformed when stating that the green movement is overrated. Now that the cost of sustaiananle building is only a fraction more than a convention building , more and more individuals and business are opting to "go green"
Tony Parkins on December 21, 2009 at 08:09 PM PST
I should have clarified. (green movement ie. LEEDS certification) Why not just incorporate smart sustainable design principles in the first place and not spend dollars documenting and chasing points so you can get a plaque from the USGBC ? If the intention of LEED certification is for good and not for profit, why such an elaborate scheme for testing/accrediting/certifying? I believe in sound sustainable/conversation measures - I don019t believe in chasing points in a monopolized system. Costs of building green by the USGBC/LEED claim only 2%-5% increase over conventional but fact is probably more than that. There is no real way to put a guage on it.
Pete Gordon on December 24, 2009 at 06:42 AM PST
I quite agree with Mr. Parkins on the point system. Many of the issues are not directly linked to the building but are community related.
I have tried to sell green buildings since the 1970's, and the customers have not gotten easier to sell to. The idea of saving energy does not sink in effectively, and people cannot connect the extra money they need to spend today to save in the future. Leed certification programs only make it more mysterious, since most of their material is held secret until you pay, my customer cannot use their website to help him understand. We need more effort like that of Jimmy Carter, when the leadership spoke up, and brought peoples attention to the issues. We need far more publicity on the energy issue, in a world where the news is probably owned by people sympathetic to the coal producers.
It appears that the green movement for building materials is focused on the areas of most apparent pain - energy conservation and water conservation. Other issues, such as forest management, sustainability and pollution are non-starters in the tight economy.
Tony,
I could not agree more on your statement about LEED. I will cite an example our company just dealt with; On a LEED University project in Wisconsin, the USGBC allowed their client to use abated asbestos quantities toward the recycling credits! As demolition and environmental contractor, we average 85% recycling of demolition debris on all of our projects. That being said; how is it that a hazardous material â which must be handled under strict regulation â when removed, be considered a recycled aggregate? My contention is that the USGBC is a fluid entity that is in a continual state of change that amends their strategic approach to LEED on a whim.
Becoming Certified in order to even be listed as green contractor in my state is very expensive. I find it very counter productive for both the home owner and the contractor. Since the contractor will pass that expense to the home owner. Also what is green by today's standards will not be considered green tomorrow. I fully agree with making ones home energy efficient so the home owner will save money in the long run, but the cost of doing so is out of reach for most people. If the country is on such a kick to go green lets get the contractors educated and certified on the states dime since in the long run it benefits the state. And since we are using recycled materials to make things green the rebates for them (ie.. appliances ) should be instant instead of having to chase ignorant government officials for rebate checks
Randy Hahn on December 24, 2009 at 10:39 AM PST
LEED is overly complicated and over documented, resulting in overpriced.
please ck w the National Home Builders Association. they have an approved, accredited GREEN Certification program that was designed for residential construction in the real world.
it is designed to not be so cumbersom that it drives costs up. there are several levels of certification for different types of projects.
GO GREEN !
I do not believe the comment "the total inventory of houses available for sale is being gobbled up" is true. Specifically the word "total" is in question. From what I have been reading in the real estate financial news there is a large backlog of homes and foreclosures that have been held back and have not hit the market yet. Most people are projecting that these properties will start coming into the market in 2010, keeping property prices down or pushing them down further. We also haven't seen many commercial foreclosures, but they are also expected this coming year.
Some Chicago stats released 11/18/09:
Just 56 residential units owned by developers in downtown Chicago were sold in the third quarter of this year, a number far lower than last quarterâs 313 and the 160 recorded a year ago, according to a new report.
Appraisal Research Counselorsâ quarterly analysis finds residential real estate in the Loop and the neighborhoods that abut it still challenged by fallout from the recession â high unemployment, tighter lending, buyers failing to close.
A glut of residential housing persists downtown. There were 3,916 new construction and converted condo units being marketed through the third quarter that were neither sold nor under contract; another 1,081
There will be some opportunities going forward for those who are creative. I am a commercial contractor in the Tampa, Florida market and we have been hit hard, but I started buying foreclosed homes about 18 months ago and have been repairing them and putting them back on the market or keeping as rental properties. This has been a nice little niche in the downturn. I have a nice system for locating and moving these properties, my profit margins have been running 30%. Why bid on projects with 40 competitors when you can do this kind of work.
Regarding LEEDS - There are two recent projects built in my community that received LEEDS Silver awards.
In both cases, the main window walls face north and east. The heat loss in both buildings is so great that in thehe first building the HVAC system was incapable of maintaining a liveable environment last winter, there was a portable heater under every desk. The other building, with two stories of glass facing north, had to hang a visqueen ceiling at the 10' mullion level in the building to be able to maintain a reasonable environment for their customers. The architects got great press for their awards, the building owners were sucked in by a program that forgot Lstiburek's mantra "It's the energy stupid".
