Recently, CUSTOM HOME polled readers about the state of their custom home building businesses. We wanted to know how readers are surviving the housing downturn and economic recession; whether they are taking on a different mix of construction work than they would have considered three years ago; and whether their companies’ balance between new-construction and remodeling jobs has changed since 2006. We also asked how much custom home builders’ revenue and staffing have been affected by the economy.
Despite the somewhat sensitive nature of our questions, CUSTOM HOME readers were willing to share. We gathered information from custom builders working all around the United States, although the majority of survey respondents are located in the Southeast (27.7 percent), Midwest (18.2 percent), and Northeast (16.1 percent).
More than 85 percent of respondents said they are taking on new kinds of work to offset the slowdown in new construction. They say kitchen and bathroom remodels (69.5 percent and 61.8 percent, respectively), home additions (64.1 percent), and whole-house renovations (55.7 percent) are the job types they are tackling with greater frequency than in previous years. They also are accepting more master suite renovation (41.2 percent), porch addition and remodeling (48.1 percent), and family room addition and renovation (46.6 percent) projects.
Only 8.4 percent say they have shifted to religious or institutional work, while 28.2 percent say they are now doing more light commercial construction. And despite the government’s stimulus funding of incentives for green and energy-efficient home remodels, surprisingly few survey respondents (20.6 percent) reported that they’re doing such work.
In fact, the split between new-construction and remodeling work has shifted substantially from 2006 to 2009 for most of the custom home builders who responded to our survey. Nearly 39 percent reported that in 2006 their business was 100 percent new construction, compared to only 6 percent who predict that new construction will comprise 100 percent of their construction work this year. More than 38 percent said they do not expect to do any new-construction work in 2009. In 2006, 5.3 percent of respondents said their work was split 50–50 between new construction and remodeling, and slightly more (7.5 percent) expect their jobs to be evenly split between new-builds and remodels in 2009.
Nearly 49 percent of those surveyed reported that in 2006 their companies started between one and five new homes, and about 24 percent started between six and 10 new homes; only 6.7 percent had zero new-home starts in 2006. The same year, 43 percent of respondents completed between one and 10 remodeling jobs and 14.6 percent completed between 11 and 50, while 39 percent did not complete any remodeling work.However, 46.3 percent of respondents expect to have zero new-home starts this year, and 44 percent expect to start between one and five new homes. Not surprisingly, remodeling work among custom home builders is up this year. Nearly 58 percent expect to take on between one and 10 remodeling jobs in 2009, and about 19 percent predict they will start work on somewhere between 11 and 50 remodeling jobs; about 13 percent do not expect to do any remodeling work. Some responded that they will take on as many remodeling jobs as they can handle.
Most survey respondents expect their companies’ gross revenue to drop significantly in 2009, as compared to 2006. Several have no clear idea of what their 2009 revenue will be, and 5 percent expect to make no money from construction this year. Almost 7 percent expect to gross $75,000 or less in 2009. No respondents reported earning $75,000 or less in 2006. While 21 percent said their companies grossed between $76,000 and $1 million in 2006, about 46 percent expect their companies to fall into that earnings category in 2009.
In 2006, about 47 percent of respondents’ gross revenue ranked between $1.2 million and $4.5 million; just about 26 percent expect to gross between $1.2 million and $4.5 million in 2009. Nearly 27 percent reported grossing between $5 million and $10 million in 2006, but just 8.6 percent expect their earnings will rise within that range this year.
As predictions for earnings have plunged, so, too, have custom home builders’ staff numbers, although many have always relied on subs rather than full-time employees. In 2006, just 5 percent of survey respondents employed no full-time staff; by comparison, 17.5 percent reported having no employees in 2009.
