With materials costs down, the time is right to redo or add on a room.
Kevin Schroeder, principal of Cutting Edge, a Chicago contractor, met with a prospective remodeling client last week who didn't want to pay more than $60,000 for what Schroeder called a $100,000 project.
With commodities like steel, aluminum and copper dropping in price, Schroeder says such price-reduction requests are common but not always possible.
In that particular case, he says, the materials comprised only 10% to 20% of the cost. But the customer was right to ask for a deal, since the price of lumber is down 2%, steel is down 9% and copper is down 11% from a year ago, according to the American Institute of Architects.
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While remodeling prices aren't dropping at the rate of, say, houses or financial stocks (which in many markets have halved), some costs are dropping enough that certain projects--if the size and materials requirements are just right--are becoming increasingly affordable.
Consider something simple, like a bathroom remodel. Sure, there's plumbing involved, but with the price of copper--and, hence, copper pipes--down, so will be the price of the job. The place to really save money, however, is on kitchen countertops, especially granite ones.
"When things were booming, everyone got into the countertop business because it was so easy to produce those products," says Schroeder. "On a typical kitchen you can save between $600 and $1,000 now."
Too Many Materials, Not Enough Buyers
Overproduction is one reason for the drop in materials prices. In 2005 there were 2 million houses built, according to the National Association of Home Builders (NAHB).
But by 2008, that number fell to 625,000. Every one of those homes needed pipes, roofs, doors and steel beams, and manufacturers' profits grew with the exploding housing industry. High-end remodels, too, became increasingly common.
"The part that seemed to be driving the growth was upper-end discretionary home improvement projects," says Kermit Baker, chief economist at the American Institute of Architects.
Take that away and you have leftover materials at cheaper prices due to lost demand. And therein lies the second reason for increased affordability: Home-remodeling activity has declined by 44% from 2005 according to the NAHB.
That means more contractors are competing for fewer jobs as clients are focusing on what needs fixing instead of what they wish looked nicer.
"You would expect that people will become more thrifty and they will spend less on alterations," says Natalia Siniavskaia, a senior policy economist at the National Association of Home Builders. "If they don't need to do it right away, they will postpone it."
That might be part of why contractors like Schroeder haven't noticed a drop in prices for necessities like roofing products.
"Even though the materials prices have come down, the roofing manufacturers are hesitant to start giving back," he says.
Some projects simply aren't discretionary, and a leaky roof counts as one of them. Redoing copper or aluminum wiring or installing a new concrete walkway doesn't take such precedence--which is why the prices of these remodeling jobs are down.
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Factory to Front Door
And getting those materials to the job is cheaper now, too. The commodities bubble, best epitomized by oil hitting $147 in July, burst due to slowing global demand, especially from China and the unraveling of speculative positions. With cheaper oil, it costs less to move building materials across states or even continents and oceans.
While Baker says to expect remodeling and building activity to decline through 2009, he says the drop has the ability to stimulate the market because it reduces costs for developers who had been squeezed by the spike in commodities.
"Prices for steel, gypsum products, lumber and cement have all come down recently, which is helping to stabilize construction costs and can also make taking on projects more attractive to developers," he says.
Now if there were only a commodity that could spur contractors to finish projects according to schedule.
In Depth: Increasingly Affordable Home Remodels
The most basic of all building materials, lumber's 2% price drop this year affects any remodeling project. Additions are obviously affected, but so are things like garage renovation, which adds to a home's curb appeal and might help to entice buyers. Lumber, sold per 1,000 board feet, currently goes for $207 but based on future prices, it is likely to drop as low as $172 in the coming year.
This mineral can be used for just about anything. You've probably written with it (as chalk) or eaten it (its often used in tofu), but from a building perspective it's useful as a primary component of drywall (contractors also call the stuff "gypsum board"). Drywall prices are off not only because of declining gypsum prices but also because drywall was such an important product for new home building and is currently in surplus supply.
Copper has taken a significant hit over the last year. The two most common housing materials you'll find copper in--which might be in need of remodeling--are wiring and plumbing. Still, when you tear out a wall to fix the wiring or rip up the floors to install new piping, most of the cost is on things other than the wires and the pipes--so careful decision-making should go into a renovation, beyond just copper prices. Copper currently costs $1.42 per pound, an 11% decline from last year.
Large-scale building projects that require structural metals are the most likely to require steel, though cosmetic changes like stainless steel appliances are another use. Also common is the use of steel studs, particularly in basements. Prices in the last year have declined 9% to $80 a tonne.
Click here to see the full list of increasingly affordable home remodels.