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There's an upside to real estate downturn

The slump will mean lower prices on labor and materials, so it's a good time to build or renovate your home.

By The Wall Street Journal
Published November 24, 2007

It's not the best time to be selling a house in much of the country. But increasingly, it's a good time to build or renovate one.

The housing slump has pushed down prices on everything from lumber and drywall to labor and design fees. Legions of carpenters, tile layers and landscapers are idle. Architects are taking on small renovation projects they once would have sniffed at and contractors are offering their services at a discount.

It's a striking contrast from the heady days of the real estate boom, when builders and contractors could hardly keep pace with demand, prices of materials soared and a six-month wait to start a kitchen renovation was commonplace.

Now, some homeowners are moving forward on renovation or building projects they've put off for years. Others are exacting substantial price cuts from contractors desperate for work.

A few months ago, Mike Bowes remodeled the bathroom and guest bedroom of his $200,000 condo in Las Vegas. The job, which cost $14,000, included a walk-in shower, a new vanity, bamboo flooring in the guest room and retextured plaster on the walls and ceilings. Last year, the same work would have cost nearly twice as much, he estimates, "and I would have had to beg someone to do it." Now, the 47-year-old commercial roofing sales manager is planning to upgrade his kitchen, living room and porch. While prices remain low "I'm going to keep going," he says.

The Joint Center for Housing Studies at Harvard University estimated that 1.3 million homes will be built this year in the United States - down from just over 2-million in 2005. On Tuesday, the Commerce Department said construction of single-family houses fell 25 percent in October from a year earlier.

Meantime, more homeowners will renovate their kitchens this year - 7.57-million, up from 7.44-million in 2006 - but they will spend a lot less, $96.2-billion compared with $127-billion, according to the National Kitchen & Bath Association. Bathroom renovations this year are expected to rise by 5.3 percent from 2006, to 10.9-million, while spending on them will grow 3.8 percent from 2006 numbers, to $70.2-billion, the trade group projects.

One reason some renovations will cost less this year is the falling prices, some as much as 40 percent, of many key building materials.

[Last modified November 23, 2007, 22:24:13]