Last year, the inevitable happened. After more than 15 years of sustained growth in the housing industry, a slowdown arrived and gradually became a market correction.
The slowdown was particularly pronounced for production home builders whose buyers exited the market. It was less clear how the market turn would impact the other two legs of housing, namely, remodeling and custom home building.
So how did remodeling fare in 2007?
By all conventional measures, remodeling did slow, and will likely contract more during 2008. Harvard’s Joint Center for Housing Studies’ new predictive measure of remodeling activity, the LIRA, (short for Leading Indicator of Remodeling Activity) suggests that remodeling retrenched during the fourth quarter of 2007 and indicates an annualized decrease of more than 8 percent this year. Yet, when you talk with established remodelers, like those who participated in this year’s Qualified Remodeler Top 500, and ask them about their businesses, most seem to be taking the slowdown in stride. The numbers speak for themselves.
In 2007, the aggregate dollar volume of the Top 500 remodelers surged to $4.86 billion, up from $4.13 billion in 2006. Aggregate gross revenues were just as dramatic, coming in at $5.04 billion, up from $4.39 billion the year before.
In reporting their “challenges” and “opportunities” on their applications for the list, the prevailing response from Top 500 remodelers this year was one of concern about the market and the economy. But rather than pull back, they seemed to use this concern as motivation to push forward. “We are seeing the same and even higher levels of business, but we’re working harder to generate qualified leads and close new business,” seemed to summarize the sentiment.
So did the slowdown simply not hit in time to have a major impact on 2007 remodeling revenues? Will the full impact only be felt in calendar ’08 numbers? Well, for the first time since this magazine began publishing its “Leaders” list 30 years ago, we asked for a forecast of remodeling dollar volume for the year ahead. The result: More than 70 percent expect to report higher remodeling revenue in 2008.
It is, therefore, safe to say that firms listed on the 2008 Top 500 are doing their part to drive remodeling forward. Across the nation, operating in 48 states, these leading remodeling firms are bucking all of the negative news about housing and moving ahead even in places where the local economy is shrinking. They are staying focused on their respective businesses. They are investing in marketing and advertising to drive more leads. And, so far, it is paying off.
With the overall size of the remodeling market estimated to be approximately $290 billion annually, the nearly $5 billion contributed by the Top 500 remodelers last year seems relatively small. Indeed, when compared with production home builders, where the largest 400 account for over half of all activity, the share-of-market maintained by remodeling’s largest firms tells the story of a very diversified and vibrant industry where local and regional players dominate markets from coast-to-coast. This fact notwithstanding, the biggest remodelers are growing and slowly grabbing a bigger slice of the pie.
Talking to the Top 500
The Top 500 remodelers to whom Qualified Remodeler spoke to sample the perspective of industry leaders were remarkably consistent in their views. None were as pessimistic about economic conditions as the prevailing news might make one believe, and they were all optimistic about an impending uptick in business. Here is what a few of those remodelers are thinking about the state of the industry:
No. 109 – Home ReBuilders Atlanta, Ga.
Design/build • $9.2 million