HOME IMPROVEMENTS SLOW WITH ECONOMY

Gazette, The (Colorado Springs), Sep 9, 2008 by RICH LADEN --

Local homebuilders and real estate agents aren't the only ones feeling the pain of a sour economy and a housing slump that's in its second year.

The ripple effects have spread to home-improvement companies and remodelers, creating tougher times for some in the industry, although other businesses say they continue to do well and plenty of remodeling work is being done.

Skittish consumers worried about job security or fretting over how November's elections will affect the economy are holding off spending thousands of dollars to finish basements, make over kitchens or upgrade bathrooms, some local remodelers and general contractors say.

"People are holding onto their money," said Lain Shappel, president of Solid Rock Construction in Colorado Springs. His company has undertaken 31 percent fewer remodeling jobs so far this year when compared with the same period in 2007, while the dollar value of those jobs is down by onethird, he said.

"Before we spend money on finishing our basement or remodeling our kitchen," Shappel said, alluding to the mindset of some area homeowners, "are we going to be OK with food on our plates and gas in our tank?"

National numbers bear out what

-- Shappel's seeing. Remodeling remained sluggish in the second quarter of this year, after having started to wane in 2005, according to a report released last month by the Washington, D.C.- based National Association of Home Builders. The association's report is based on a national survey of remodelers, who also said they expect remodeling activity to remain flat in 2009.

The association's report doesn't break down numbers for cities or states. But on a regional basis, secondquarter remodeling activity declined in the West, South and Northeast, but rose in the Midwest.

A second study released in July by Harvard University's Joint Center for Housing Studies suggests that home-improvement activity will continue to decline into early 2009.

Gopal Ahluwalia, a vice president for research with the National Association of Home Builders, said it's inaccurate to think that a slump in home construction is the time homeowners spend money on home improvement or remodeling.

Homeowners are more likely to invest in their properties when times are good and home values are rising, he said. The opposite is true; prices have fallen in many cities nationwide, and prices in the Springs fell in July for the 12th-straight month, according to the Pikes Peak Association of Realtors.

"If the price of my home is dropping," he said, "I don't want to invest more money into my house."

Because of uncertain economic conditions, Ahluwalia said, many homeowners will repair leaky roofs, fix air-conditioning systems or make other can't-livewithout repairs.

"People are afraid to spend large amounts of money," he said. "They are doing what must be done ... They'll say, 'I can still use the kitchen. It doesn't look that great, but I can live with it.'"

But that attitude doesn't mean home improvements and remodeling have come to a standstill, some members of the local industry say.

Colorado Springs has an inventory of thousands of aging homes in the Old North End, the west side and several other mature neighborhoods, said Kenton Pass, owner of Kenton Pass & Co., a residential construction flrm and head of the Housing and Building Association of Colorado Springs' remodelers council. Owners of many such homes recognize the need to invest in their properties, he said.

Likewise, many homeowners enjoy their neighbors, schools, parks and shopping, and don't want to abandon them for the sake of a newer home, he said. As a result, many homeowners redo kitchens and bathrooms, finish basements or construct an addition or deck -- regardless of the state of the economy or whether home values are falling, Pass said.

His business is strong, Pass said, and he's adding employees. Colorado Springs continues to be a city where many people move and retire, he said. When some newcomers buy an older home, they make upgrades and recognize the value of investing in their homes.

"Most people today don't have savings accounts," Pass said. "They're counting on the equity of their home, and they're counting on that to bail them out. They're 10 or 15 years away from retiring. So, they invest in the house. A lot of times all they have in their savings portfolio is their house."

Real estate agents say home sellers need to be smart about how much money they spend on improvements and remodeling. Sure, real estate agents always advise sellers to make certain their homes are in top condition when it comes to their appearance, cleanliness and even smell, especially in today's market when competition is fierce among thousands of homes listed for sale.

Yet, some real estate agents say home sellers shouldn't go overboard on remodeling and home improvements and, instead, should size up the selling prices of nearby homes and spend what's appropriate to make their homes competitive.