CROWD CONTROL Larger remodelers and design/build companies are also experiencing a more crowded marketplace for the bigger, more expensive, more intricate projects. Landis makes a point to contact homeowners who don’t use his company for their project, and one of the questions he asks is which company they did go with. “On this last go-round, I didn’t recognize as many [companies] as I usually do,” he says.
Of course, the new competition in this arena isn’t generally out-of-work carpenters. Rather, it’s custom and spec builders looking to diversify to stay afloat as their new-home business temporarily dries up.
Larry Cafritz, of Laurence Cafritz Builders, in Bethesda, Md., does a combination of custom homes, spec homes, and remodeling. In a normal year, he says, 10% of his total volume comes from remodeling. “This year, it’ll be more like 50%,” he says. “I’ve been doing almost exclusively [spec] homes since 2000,” Cafritz continues. “Now as the market gets slower and more risky, I’m focused more on custom homes and custom remodeling.”
Cafritz doesn’t think he’s alone, either. “It’s a trend,” he says. “A lot of builders are going to have to do that if they want to manage their risks.”
Leo Schwartz, of Bethesda, Md., custom builder Edgewood Builders, says that his company’s relatively small size — he only builds two or three homes a year — means that he doesn’t have to worry too much, but he notes that the market in general “absolutely has experienced a slowdown.” His observations of the industry match what Cafritz is doing. “There’s a pretty good segment of guys who have always done all three,” he says, referring to spec homes, custom homes, and remodeling. “They have other aspects of their business to lean on,” he says, “and they’re leaning on [remodeling] a little harder right now.”
There are a fair number of new entrants into the marketplace, however, who — unlike Cafritz — have no remodeling experience. Whatever threat they pose to established home improvement companies is likely to be short-term. “Remodeling has always been more challenging than building new,” Cafritz says. “It’s more time-consuming and detail-oriented. It will be a learning curve for those who want to stay in the business.”
The mistakes the newcomers are likely to make — underbidding a job because they grossly underestimate the amount of time needed for a remodel, for instance — will make their bids low, and established remodelers may find themselves losing a job here and there on price alone. But the very same mistakes that earn them a job will ultimately lead to the lowballing company’s demise. “Some people might just go out of business,” Cafritz says.