Home remodelers lose business as consumers skip or scale back projects

Lopas, president of Black Diamond Construction in Las Vegas, has seen an 80 percent drop in business in the last 12 months. When his phone rings today, it’s typically a worker looking for a job or a subcontractor trying to get on Lopas’ bid list. Lopas ran out of working capital and uses retirement money to keep his doors open.

“The truth is, people aren’t doing anything,” Lopas said. “I’ve been in Las Vegas since 1989, and the town has always been booming. I’ve never seen anything like this.”

Spending on home improvements continues to decline as rising unemployment and falling home prices dissuade consumers from investing in costly renovations. Nationally, homeowners spent $124.6 billion on property improvements (excluding maintenance) in the first three months of the year, down nearly 8 percent from the year-ago period, according to Harvard University’s Joint Center for Housing Studies. The center estimates spending on such projects will fall 12 percent this year.

The remodeling industry is adjusting by cutting prices and offering a larger selection of lower-cost products and finishes. Contractors are helping homeowners scale back plans to make projects more affordable, and acting as consultants for homeowners who are willing to put in the sweat to cut costs.

A recent survey from ServiceMagic showed that online requests for smaller projects like countertops or window coverings rose in the first quarter compared with a year ago, while demand for larger remodels decreased. Requests for maintenance and repairs like heating, insulation, air conditioning — thanks to new energy-saving tax breaks — also increased during the quarter.

“People are doing things like cleaning upholstery and floors rather than replacing it,” said Craig Smith, chief executive ServiceMagic, a professional services locator. “Or they’re downshifting. They’re still investing in kitchens but they’re doing it more cost-effectively.”

Lopas blamed the work slowdown on two factors.

First, many homeowners have lost substantial amounts of the home equity that traditionally financed home improvements.

More important, though, consumers worry about the future and want to “wait to hear that things will get better,” Lopas said.

“There are people with money out there, but they’re holding on to it,” he said. “Maybe they just don’t know what’s going to happen.”

To hear managers at Home Depot tell it, Lopas’ phone might have stopped ringing because consumers want to save money by doing home improvements themselves.

The installation division at Home Depot’s store on Fort Apache Road missed its sales goals by 48 percent in 2008, said department head Marsha Grigsby.

But paint sales at the store are better than Grigsby has ever seen, as consumers snap up fresh colors for do-it-yourself projects. Do-it-yourselfers have also goosed sales of lumber and drywall, many of them looking to repair damage to foreclosure homes, Grigsby said. Cost-sensitive locals are investing more in saving on utility bills, snapping up compact fluorescent light bulbs and repairing leaky faucets. And attendance at do-it-yourself clinics covering projects ranging from plumbing to installing floor tile has as much as tripled at Home Depot stores nationwide, spokeswoman Kathryn Gallagher said.

“People have money. They’re just being more conscious about how they spend their money,” Grigsby said. “They’re more apt to do the work themselves than have someone do it for them.”

Home Depot’s fourth-quarter earnings showed above-average sales in building materials, plumbing, paint and hardware, and increased market share in carpet, hand tools, power tools, blinds, windows and doors.

Company executives said in their earnings conference call that consumers weren’t spending much on big-ticket discretionary projects, such as new kitchens or bathrooms. Big-ticket purchases — anything more than $500 — posted double-digit declines in the fourth quarter, the company said.

Daniel Bell is doing demolition work himself after a contractor told him how much it would cost to remodel the upstairs master bedroom and bath in his 85-year-old farmhouse in Brentwood, Tenn. He’s doing the trim work and painting too, and will shave $3,725 off the total bill.

“You don’t need a highly skilled person to do those things,” said the 37-year-old minister, who tackled a good chunk of a downstairs renovation last year.

Earlier this decade, home remodeling was fueled by “unique circumstances” like a runaway housing market, low interest rates and loose credit. It won’t rebound until housing prices stabilize and the payback on home renovations improves, Kermit Baker, director of the remodeling program at the Joint Center

“What has been hurt has been the upper-end discretionary projects like kitchen and bath remodels, structural projects and room additions,” Baker said.

And remodelers like Luckjohn Dickson are taking what they can get.

Instead of building a new porch, Dickson repaired the old one for one client to help him save on costs.

To spruce up her house, another client had Dickson’s crew build a picket fence rather than add a room as she originally intended.

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512.

The Associated Press contributed to this report.