From the Nate Burkus Show, Holmes on Homes:

Renovation Rehab

Mike Holmes tells you everything you need to know when hiring a contractor.

Transform Your Bedroom and Relationship

October 11 2011

Choosing A Home Remodeler On The Nate Show

Known as “The Hill” to locals, Del Cerro is a centrally located community in San Diego. The town is perched up on a hill overlooking its bordering areas of San Diego State University to the south, Mission Valley to the west, and Mission Trails Regional Park to the east and north. Some areas have beautiful views of Lake Murray and on a really clear day you can see all the way out to Mission Bay and downtown San Diego. The small town has one high school and a few stores and restaurants, but the central location gives residents access to all San Diego has to offer. In less than 20 minutes you can be surfing, hiking, dining, or catching the latest flick at the theater. Interstate 8 and San Diego State University is located right next door, giving the south side of Del Cerro a college town feel.

The demographics of Del Cerro include mostly single family homes with the majority of residents above the age of 30. The population in 2000 was recorded at 25,553, but it is estimated to have increased over the past decade to nearly 34,000. It is an upper income area with a median household income of $64,358. There are a total of 10,467 households, of which 6,846 are occupied by families. It never gets too hot or cold, with an average high of 83 in the summer and 68 in the winter. Del Cerro is seven miles to the San Diego International Airport, one mile to San Diego State University, and three miles to the San Diego Chargers stadium, Qualcomm Stadium.

Del Cerro is a great place to own a home in San Diego. You have easy access to all areas of San Diego, not to mention the benefits of a small town feel with great views from the hillside. Located further away from the coast, the climate is dryer and slightly warmer than the beach.

Since many of the homes in Del Cerro were built in the 60’s and 70’s, it is a prime area for remodeling too. With some homes an ocean view can be captured with a second story addition. Other popular remodeling projects in the area are custom kitchens, great room/family room additions and major home renovation which can include energy saving measures like new roofing, windows and heat/cooling and solar.

The housing market boom of the late 90’s and early 2000’s has completely flat lined. People are no longer able to qualify for a new home loan easily and their finances have most likely tightened during their daily lives. Instead of searching for new homes to buy in better neighborhoods, they are accepting that they will be living in their current home for many years to come. The mentality has changed from new home buying to improving the home you already live in. The home remodeling industry is making a strong comeback and there are several factors that help explain the recent and future remodeling boom.

1. Stabilizing economy: The economy may not be making a full rebound, but it seems to be stabilizing and should remain somewhat constant through the next several years. People will regain trust in the economy and feel more comfortable spending money on larger projects such as home remodels.
2. Stable housing market: The major downward swing in the housing market and drastic increase in foreclosures over the past few years is now stabilizing. With fewer people losing their homes (thankfully) and more people purchasing affordable housing, there will be a larger market available for home remodels.
3. Age of houses: In higher income metro areas, the housing stock is older and the people living in them have the necessary income to make improvements. The higher value homes in high income metro areas will regain value faster than low income areas and provide the main area of growth for the home remodeling industry.
4. Increased spending: Since the economy seems to be stabilizing and people are showing new confidence in it by spending rather than saving more, they will now use their discretionary income to spend on improving their living conditions.
5. Job security: During the lowest point of the recession, many people were worried for their own job security. With a more stable economy, less people will be afraid of losing their jobs and will once again feel more comfortable spending money on housing projects. Without the fear of job loss looming over people’s heads, they can begin spending money on other things that will make their life more comfortable.
6. Necessary upgrades: Over the past several years people have been neglecting the home upgrades that are necessary for a comfortable level of living. The next several years in the home remodeling industry will have a large focus on the necessary upgrades that were neglected in the past.
7. Baby Boomer retirement: The Baby Boomer generation is beginning to retire and either find a home to spend the rest of their time at or improve upon their own. They will prepare for retirement and aging by spending money on upgrades to make their home as comfortable as possible.
8. Foreclosure repairs: The recent increase of buying, repairing, and reselling home foreclosures will create a large new market for the home remodeling industry. The foreclosures often need major repairs and renovations, adding to the home remodeling boom.
9. Energy efficiency: Despite the sluggish economy, going green is still a priority among the higher income, higher value home metro areas. Home renovations that will improve energy efficiency will continue increasing over the next several years, especially if the federal tax incentives remain intact.
10. Reduced housing mobility: Many people that are locked into long-term, low-interest rate loans will not easily be able to move and qualify for an equal loan. Their lack of mobility will result in them choosing to upgrade their homes rather than moving into a new home with a new mortgage and a higher interest rate.

Image: Pixomar / FreeDigitalPhotos.net

The unfortunate news for the housing development market in our struggling economy is turning out to be great news for the home remodeling industry. While one industry is fighting off bankruptcy, the other is helping families who cannot afford to buy new homes by fixing up the ones they already own. If you plan to remain in one house for the next five to ten years, you are likely to make it as comfortable as possible.

A recent study completed by Harvard University’s Joint Center for Housing Studies (JCHS) forecasts that “the next decade will yield solid growth and many new opportunities” for the home remodeling industry. The study describes several indicators that are pointing towards a steady increase in business for the remodeling industry.

Despite the forcasted growth, the remodeling industry is going through some changes. Instead of the large and luxurious home additions and remodels during the previous housing boom, people will be more cautious about spending their money. There will be a transition from the excessive house additions of the late 90’s to necessary remodels that will create a home that can accommodate the family for many years to come. When someone will be looking to make an investment in improving their home, it will not be directly related to increasing the resale value.

Trends show that people will be planting some roots over the next decade. There will be fewer new home purchases and frequent moving. Homeowners will still want to increase their quality of life, as they may have in the past by moving to a bigger and better home in a nicer neighborhood. The weaker economy has instilled a new mindset of saving as much money as possible and only spending it on necessary items and amenities. Typical projects for families with reduced household mobility will include roof replacements, HVAC system upgrades, energy efficient window replacements, and room expansions.

The home remodeling industry is not solely dependent on families without household mobility; it is also showing growth in several other categories. During the recession, many homes were foreclosed by the banks and left abandoned. These homes were gutted by the previous residents, thieves looking for copper piping, and even transients. Now that the economy seems to be slightly more stable, the owners who bought the foreclosed home for dimes on the dollar are refurbishing them and getting them ready for resale. The JCHS report showed that owners of foreclosed homes spend, on average, 15 percent more on home improvements than the typical homeowner. The sad, but true, story of thousands of people’s homes being foreclosed during the recession has created a new market opportunity for savvy homeowners and the home remodeling industry.

One often overlooked growth indicator for the home remodeling industry is the new emphasis on energy efficient and “going green” types of repairs and replacements. In metro areas with higher home values, people are increasingly replacing their older windows, roofs, appliances, heating and cooling systems with low-energy alternatives. Anything that involves saving energy and being more environmentally friendly is “in” right now. Despite the recession between 2009 and 2010, improvement projects that included green features increased from 25 percent to 28 percent. The steady growth in the industry is often attributed to the strong tax incentives and government subsidies for green residential projects.

With an economy that seems to be bouncing back, homeowners stay in one place, foreclosed homes needing repair, and a culture still focused on going green, the home remodeling industry is forecasted to bounce back in a huge way. With the new report released by JCHS, home remodeling companies can hang tough and have hope for a brighter future with strong growth over the next decade. The industry may have changed and the type of repairs people are spending their money on may be more out of necessity than before, but the growth is positive nonetheless.

Home Remodeler Screening Tips

Every consumer undertaking home remodeling deserves a high quality project that is completed on time and within budget.  A competent contractor not only will make the process easy for you, they will improve your quality of living, and at the same time increase the value of your home.

Here are 10 valuable tips to help you make an informed decision when you chose a contractor to remodel your home.

1.  Start by checking all the companies you are considering online at www.cslb.ca.gov and www.bbb.org. Google each company followed by “reviews” to see what other people are saying.   What seniors should know before they remodel.

2.  Only consider contractors who are licensed, bonded and insured. In California, contractors are not required to maintain general liability insurance. Choosing a company who cannot provide you with proof of general liability and worker’s compensation insurance puts you, the homeowner in serious risk if a worker gets injured or causes damages to your property.

3.  Everything should be in writing starting with a “scope of work”, which is the narrative part of the contract.  The plans, home improvement contract including start/completion time and scope of work document makeup the entire agreement.  If the scope of work is written clearly and concisely, with no gray areas, there should be no misunderstandings.

4.  California license law requires that homes built or remodeled prior to December 31, 1977 must be tested for asbestos and prior to 1982 for lead.  If any either of these hazardous materials are discovered, remediation must be completed by an independent firm who is properly trained and licensed.  You may want to insist that testing be completed before for you finalize the home improvement contract.  For more information click here

5.  Part of the contracting process should include you approving the construction plans.  Make sure you fully understand what is on the plan and what is excluded before signing off.

6.  If there are contract allowances, go out shopping to confirm the amounts are sufficient to purchase the caliber of fixtures and finishes you desire this will avoid costly over runs that lead to change orders.

7.  By California State Law, the following documentation must be provided to you by the contractor when you enter into a property improvement:  Home Improvement Contract, Notice to Owner form, Check Out Your Contractor form, California License Law Notice, Information About Commercial Liability form, Notice of Cancellation (2 copies)

8.  Most well established contractors would not ask for a down payment.  By California law, a contractor is only allowed a 10% down payment or $1,000, whichever is less.

9.  Check the payment schedule provided by your contractor to make sure there are milestones that require inspection tied to when you pay where possible.  There should be a 5 – 10 percent retention held until final inspection is approved and all punch list items are completed.

10.  You have the right to ask for proof that subcontractors and vendors are paid.  Demand lien releases at each stage before making the disbursement.