Homebuilders hopeful as housing market thaws

Homebuilders hopeful as housing market thaws

After more than four years on life support, the U.S. homebuilding industry is showing signs of getting back on its feet. Housing starts in January registered at 613,000 homes, which the Commerce Department hadn't logged since July 2008. Other economic indicators seem similarly encouraging.

To get a read on the home construction market at the Main Street level, Angie’s List contacted several homebuilders across the country who took part in our most recent quarterly survey. Every three months, Angie’s List invites all A- and B-rated service providers to tell us how their businesses are doing now compared to a year ago.

In the survey conducted in January, more than half of all respondents said their business are either doing “slightly better” or “significantly better” than last year at this time. About a third said there’d been no real change and 13 percent said things had gotten worse. Although the number of homebuilders participating in the survey was too small to draw conclusions from, most of those we heard from said business was holding steady and about a third said business is better.

But just like the old maxim, where the market is hottest depends on location, location, location.

Utah's busy as a beehive

“We have been extremely busy,” reports Cameron Teeples, owner of Teeples Custom Homes in Orem, Utah. “We normally build two to three homes a year, and the majority of our work is through remodeling, basement, finishing and additions. Right now we have three homes under construction and another we will be starting soon.”

Utah has weathered the economic downturn better than most states, with an unemployment rate barely over 5 percent. Utah County, where Orem is located, is one of the top ten fastest growing counties in the nation with a plentiful population of college graduates and a booming tech industry.

Teeples Custom Homes, which has a high rating with Angie’s List members, has four full-time employees — including Teeples himself — and indirectly employs around 15 subcontractors on a relatively consistent basis. In addition to new home construction, Teeples takes on remodeling projects that keep his crews working on jobs regardless of weather conditions.

Though those remodeling jobs have been steady, Teeples cautions that part of the rush might have been due to the holidays. “Many people push hard to have their jobs finished by Christmas," he says, "and then another influx of people who want to start their jobs happens after the New Year.”

One area of concern for Teeples and all home builders has been a recent jump in the cost of construction materials that has put a strain on his profits. “Drywall materials jumped 30 percent on January 1st,” Teeples says. “Lumber prices have steadily been rising, as have roofing."

Boston's standing pat

However, many other homebuilders — like Stephen Fabrizio, a third-generation owner of Fabrizio Construction in Duxbury, Mass. — would be glad if their biggest problem was the cost of materials.

“Everybody keeps saying how we’re almost out of (this recession)," Fabrizio says, "but I keep waiting for the next big job to come along and they’re just trickling in and not dropping like they used to.”

Fabrizio Construction has been in business for about a century, and its owner feels like he has more stability than newer companies. “I have a lot of repeat business that fed us a lot of small maintenance items, so that definitely helped us.”

After a strong end to 2010 and into 2011, his business started to slow down in the middle of 2012. “January was the quietest it’s ever been."

And unlike out west, much of New England has less open land available for new construction. “We’re in a funny market where I’m close to the coast halfway between Boston and Cape Cod,” Fabrizio says, “so there’s not big tracts of land anymore.” Even so, he's been seeing encouraging signs. “People are still spending the money,” he says, “and they’re not cheap homes either.”

Like many general contractors, has had to get by with fewer new home projects. After halving his staff during the recession, Fabrizio has maintained three full-time employees for the last two years, partly by focusing on remodeling projects like high-end dream kitchens. Indeed, most homeowners in the Boston suburbs opt instead for big remodeling projects for their existing homes rather than new home construction. “Now I’m seeing a lot of the $50,000 and under kitchens coming through right now, and not a lot of the big opulent, over-the-top kitchens.”

Location matters when chasing business projects. Fabrizio picks up some work in Boston, where “there’s always remodeling going on in the city, and there’s always big money going in them.” The bedroom communities in the western suburbs and the coastal towns sustain his company with the big remodeling projects, but the “sporadic towns” don’t drum up much business at all.

Fabrizio faces his business future with some optimism, mentioning that he's put out several bids just the pat last three weeks. “I think (homeowners are) starting to loosen up their purse strings a little bit and starting to be a little less nervous. I do feel it’s going to be a pretty good spring. Once everything gets rolling, I think (the economy) will start to pick up again.”

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