Remodelers split on pace of industry rebound

Jason Hicks, with KRN Construction, discusses bathroom fixtures with Walter Skipper of Citadel Enterprises remodeling firm on the home under renovation in Molasses Creek in Mount Pleasant.

Walt Skipper walks across sawdust-covered hardwood floors strewn with nails and lumber.

He points out where a wall used to be, protruding wires for soon-to-be-mounted flat-screen TVs and the shell of what will be a walk-in closet as big as a bedroom.

"This is a major undertaking," the lead carpenter for Citadel Enterprises remodeling company said of the Mount Pleasant home that's doubling in size to 5,500 square feet.

Skipper isn't complaining. He's thankful for the renovation job that has kept him busy since November.

"We have more work than we have people," he said. "Last year, we had the same amount of people, but we didn't have the work."

With home sales still in a slump, some people have turned to remodeling what they already have, but the renovation industry is by no means in the throes of a major upswing. At least not yet.

Smaller projects that people could afford replaced major home overhauls during the prolonged recession, as homeowners sat on the sidelines paying down debt, keeping an eye on property values and waiting to see if they held on to their jobs before taking on expensive improvement projects.

Upgraded forecast

A Harvard University study dubbed the Leading Indicator of Remodeling Activity, released in July, shows home improvement spending has been on a steep downward slide since before the recession began nearly three years ago, falling from $146.2 billion in early 2007 to $110.9 billion during the most recent April-through-June period.

Spending will bottom out during the current quarter to $107.7 billion before climbing 5 percent in the final three months of the year, according to the study. It then will post a double-digit jump of 12.4 percent to $128.8 billion early next year, the study adds.

"Absent a reversal of recent economic progress, there should be a healthy upturn in home improvement activity by year end and into next year," said Eric S. Belsky, managing director of the Joint Center for Housing Studies at Harvard.

"The recovery in home improvement activity appears to be moving beyond simple replacement projects and energy retrofits to broader remodels and upgrades," said Kermit Baker, director of the Remodeling Futures Program at Harvard.

Citadel Enterprises owner Pete Loy and other local remodelors hope the Harvard study hits the nail on the head, but they remain cautious of its findings.

Loy predicts a slowdown toward the end of the year and during the first two months of 2011 before remodeling activity perks up in the spring.

He said his company has had its best year ever, but that's because of key projects that were in the negotiation phase long before hammers started pounding, not because of a sudden surge in demand.

Bob Fleming, owner of Classic Remodeling & Construction on Johns Island, sees a small uptick in business but no major rush to big home improvement projects.

"Project sizes are definitely smaller," he said. "It's kitchen and baths rather than major additions. They are concentrating on repairs and maintenance. I get the sense that people want to do something, but they are afraid to do it.

"We are not seeing a decline in the amount of jobs we are looking at. We are seeing a decline in their willingness to part with the money," Fleming said. "They say, 'I'm not ready to do it right now, maybe in the fall or next year.' "

He disagrees with the Harvard study, saying the industry will recover more slowly.

Rob Crawford, owner of Renaissance South Construction Co. and chairman of the Remodelers Council of the Charleston Trident Home Builders Association, agrees that the Harvard survey is overly optimistic.

"I do think the industry is through the worst of it though," he said. "Things will get better, but it's going to be a long, slow recovery, not a high-pitched recovery. Most of the projects will be small. I just don't see a boom recovery."

Crawford feels a lot better about the remodeling industry than he did a year ago, but he senses people's confidence in spending is still pretty shaky, given the ups and downs of the stock market, especially since this past spring.

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"I think Kiawah is still a fairly healthy market," he said of the upscale resort island. "I'm seeing a lot more things in the more affluent areas."

He said Charleston is in a better position than most places around the country because of the influx of new industries, such as Boeing and its spinoffs, TBC Corp.'s tire distribution center and the Clemson University wind-turbine research project.

Building confidence

Dean Herriges, vice president of the Illinois-based National Association of the Remodeling Industry, thinks the trade group's 8,000 members hit the bottom earlier this year and started a slow crawl out of the recession's basement.

"The public is feeling much more engaged in the idea of doing remodeling, much more so in the past six months," Herriges said. "Throughout the nation, there is more consumer confidence. Suppliers are picking up a little bit. Projects are getting a little bigger. For the past 18 months or two years, it's just been maintenance projects such as bathroom remodels and not extravagant projects. There's more investigation now into additions."

The nation's largest two home improvement stores reported increased sales for their first quarter, a signal of a possible turnaround for the industry. More telling will be their second-quarter earnings reports that come out later this month.

Home Depot, the largest home improvement retailer, reported in May that its first quarter sales rose to $16.9 billion, a 4.3 percent rise over the first quarter of 2009. The Atlanta-based company expects sales to be up 3.5 percent for the year.

Lowe's, the second-largest home improvement retailer, reported in May as well that first quarter sales climbed -- to $12.4 billion, a 4.7 percent surge over the same period a year earlier.

"Consumers are showing signs of re-engagement in home improvement, including discretionary projects and purchases of bigger-ticket products, which had taken a back seat during the worst of the economic downturn," Lowe's Chief Executive Robert A. Niblock said in the company's latest financial report.

Like Home Depot, Mooresville, N.C.-based Lowe's also expects sales to rise for the rest of the year and into early next year, but is more optimistic in its latest financial statement. Lowe's predicts items will move off the shelves 5 percent to 7 percent faster than in fiscal 2009.

Reach Warren Wise at 937-5524 or