Real Estate

Remodeling business is booming

With median prices increasing, homeowners decide to fix up what they've got

by Joshua Alvarez

"Business is great, feels like 2007 or 1999," said Linder Jones, an architect at Chris Donatelli Builders, a San Jose-based home construction and remodeling company.

Quickly realizing both those years preceded recessions, he laughed. "Well, hopefully not like that. But business is robust."

In so many words that is what leaders of residential remodeling and construction companies throughout the Bay Area are saying.

"Compared to five years ago it's way better," said Jim Kabel, president and CEO of CASE Design Remodeling, based in San Jose. "Remodeling wasn't as affected as home construction during the recession, but it still hurt. People did not have equity in their homes, their values dropped. We started our business 10 years ago, and 2014 has been our best year ever."

Other business leaders are reporting similar success. Part of the reason, contractors are saying, is the booming tech industry.

Real estate prices in cities like Menlo Park, Palo Alto and Mountain View are so expensive, and are appreciating so rapidly, few homeowners are considering selling their homes, but are increasingly attracted to investing in expanding and remodeling.

"The new homes around here cost five times the national average but remodeling here does not cost five times the national average, so you can make the investment in remodeling and get a decent return," Kabel said.

"There is confidence in the market again, and with the increase in housing costs, many homeowners have the equity and desire to remodel an existing home," said Bella Babot, director of marketing at Harrell Remodeling, Mountain View. "Several of our clients absolutely love the neighborhood they live in, and want to stay there, thus feel that the investment in their home is a worthwhile one."

That seems to be exactly what homeowners have in mind. With equity lines reopened and economic uncertainty lifting, money is starting to go towards home investments.

Leon Chen bought his 1,400-square-foot home in Menlo Park in 2009 and just finished installing 850 square feet on top of it.

"We decided to increase the size of our home by remodeling because the cost of buying a home of that size was going to cost us a lot more," Chen said. "The cost of buying was more expensive than the cost of building. We love our neighborhood, and we would have had to change neighborhoods if we wanted a bigger home. Building offered us the opportunity to stay where we are and save money."

Contractors and architects report a surge in requests for multi-room projects and full remodels. Kitchen and bathroom remodels remain the most popular requests. "This year we are seeing a lot more projects that are multi-room and additions," Kabel said. "In the past we were lucky to see two or three small kitchens or bathrooms. No question we've had an influx of big-scale projects."

Kathryn Dunlevie has lived in her Palo Alto home for 20 years. She remodeled her garage in 2010, which she uses as her art studio, and her kitchen a few years later.

"The garage was starting to fall down. It was built in the 1920s out of scrap lumber. The facade was beautiful but the material was bad," she said. "The house was built in 1909 and the kitchen was remodeled in the 1950s or '60s and it had an outdated design and it was just old."

At the same time, in this type of market, buyers have to be willing to purchase a home that may not be to their liking and pay contractors to remodel or rebuild the property. "One third of our customers are new clients with new homes," said John Hammerschmidt, CEO of Hammerschmidt Construction, a design and build firm based in Los Altos.

"I get 50-50 between new homeowners and people who have been living in their homes for five to seven years," said John Merwin, president of Dimensional Construction, which worked with Chen and Dunlevie. "I'm booked up until June of next year because of two large projects. New additions and remodeling are most of what I'm doing." Jones also reports half his work comes from new homeowners.

Eichler owners are also getting into the act of remodeling their homes. "It's rare to see Eichlers that have not been remodeled," Hammerschmidt said. "But owners are keeping to the original intent of the design."

"Replacing the large expanse of single-pane windows with energy-rated windows is one of the more popular upgrades among Eichler owners," Babot said. "We've seen whole-house remodels of Eichlers that respect the original design, while also bringing the home up to today's design standards with current appliances, fixtures, flooring and functional interior design."

Freelance writer Joshua Alvarez can be emailed at joshua.alvarez1189@gmail.com.

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