Whos building what right now?

Southwest homeowners are still remodeling, but thinking small

A sure sign of spring in Southwest — known as one of the strongest construction and remodeling markets in the metro — has long been the appearance of dumpsters, construction signs and port-a-potties.

Over the long winter, while we watched jagged red lines head downward in our portfolios and upward in unemployment statistics, many wondered whether this spring would see the same harbingers of a busy summer filled with the sounds of hammers and saws.

The builders and remodelers the Southwest Journal talked to all said — cautiously — yes. Most said that customers are scaling back their ambitions and that fewer inquiries are turning into signed contracts. But has the phone stopped ringing entirely?

“Heck, no!” said Steve Schirber of SMS Builders, without hesitation.

“I think the weather pulled a lot of people out from the winter funk, if you will,” he said. “I don’t think the recession’s as bad as a lot of people thought it would be and people are starting to test the waters. Banks are lending again.”

The typical size of Schirber’s projects has gotten much smaller, dropping, in his estimate, from between a quarter and a half a million dollars to somewhere between $100,000 and $250,000.

“In the last five years, where the market was really hot,” he said, “was in the whole-house remodel…. Those types of projects are going to be fewer and farther between.”

Now he’s doing a lot of kitchens and master suites, which tend to hold their value well.

Rocky DiGiacomo of DiGiacomo Homes & Renovation says his phone is ringing, “But not with the kinds of jobs we’d like.”

He describes the focus of his company’s work as “bringing South Minneapolis homes into the 21st century” by opening up floor plans in ways that don’t alter the original footprint.

“We’ve been finding people are hesitant to make those kinds of broad changes because everybody’s nervous, everybody’s sitting on their hands,” he said. “If you just remodel a bathroom — if you just throw a few dollars here and there — there’s a lack of holistic planning about it. And I think people don’t get the same value out of their money that way.”

He argues that, while external factors like job insecurity are affecting the remodeling business right now, Southwest Minneapolis is and will continue to be a strong market.

He points to a strong trend toward a return to urban living. “I think that’s going to drive values higher, faster in the city than in the suburbs — maybe the first ring suburbs, too, but more so in the city. There are a lot of people who want to be back in the city. They want the city life. They want the culture. They want the amenities. They want the walking…. It’s been awhile since Minneapolis has been thought of as just a starter home. Now people are starting to think of them as luxury homes.”

Susan Denk, of White Crane Construction, agrees. “I think the building climate in Southwest is fabulous. Customers continue to be very, very thoughtful about their projects and have a tendency, because of the age of the housing stock, to think more than one step ahead,” she said. “The other thing that differentiates [Southwest homeowners] is they love their neighborhoods. They are deeply committed to the one they live in and that’s one of the things that will keep the remodeling business strong.”

Denk points to “green” building as an important part of her business right now. “All of our clients are more educated in green building than before and have more interest in energy efficiency,” she said. In fact, it’s not even a trend any more: “It has become the norm.”

Michael Anschel of Otogawa-Anschel Design-Build has seen that trend among his customers, as well. “We have seen an increase in the number of homeowners who are familiar with Minnesota GreenStar and want to have their projects certified green, but more than anything we are seeing an expectation from homeowners that their projects be green in some fashion.” He noted that family-oriented spaces like mudrooms and breakfast nooks are becoming increasingly popular.

Nearly everyone we spoke to said that, while banks are lending and rates for qualified buyers are almost unprecedentedly low, these days it’s standard financing or no financing.

“Most customers are having to come in a better cash position when they’re looking to remodel,” said Ron Sonnek of Sicora Remodeling. “That’s the larger issue these days: What kind of loan can you qualify for in relation to the value of your home?”

Schirber, of SMS, echoed a view voiced by many builders: We’re all going to have to get used to slower appreciation. “It’s a readjustment,” he said. “People aren’t losing value in their houses, they’re just going back to the original, actual value. If you’ve been conservative in the loan-to-value ratio in your house, you’re doing just fine.”