From Smaby’s perspective, a softening of real estate prices is also a good thing. “I see some opportunities, if not for me personally, then for the people I work with.” For many if not most of Smaby’s clients, a new-home or remodeling project is Part Two of a real estate deal, and the current market is luring smart strategic buyers who waited out the boom. Of one such couple, Smaby says, “They’re thinking about making an offer 30 percent less than it would have been two years ago. And they might get it. People are always asking me, ‘Should we buy this? Is it worth it?’ And now I think it is.”
Bryan Whittington’s clients are thinking likewise. “Everybody says there’s a slowdown, but most of my clients are smart and well educated,” says the Bethesda, Md., custom builder and remodeler. “They’ve been waiting for this to happen.” In Whittington’s market, a close-in suburb of Washington, D.C., “location and quality trump everything.” In recent years, that has meant one thing: teardowns, which are a mainstay of Whittington’s new-home work. “It’s kind of nuts what happens around here,” he says, “the money people will plunk down without even thinking of the house.” The current market has done nothing to change that. If anything, Whittington says, clients are becoming more willing to spend on mill-work and architectural services. While buildable lots in Bethesda had been starting at $900,000 a year ago, “Now you’re seeing them in the low $800s, or $750.” Trade contractors are feeling the slowdown in their work outside the Beltway, Whittington says. “They are more hungry, some of the larger subs who do production work. I’m getting a lot more persistence from subs I’ve never heard of before.” That translates into greater price flexibility than Whittington has seen in a long time. “So you’ll save on the lot and maybe a little on the house.” Far from slowing his business, “It’s actually increased my lead calls. We’re busy. It seems most of the builders I know are busy.”
Boston remodeler and custom builder Steve Payne has been in business since 1982, and he is used to living in a bubble. “Most of our customers are economy-proof,” Payne says. They don’t borrow to build, so interest rates are not a factor, and they need not wait to sell their existing house before buying and remodeling a new one. “They buy what they want to buy and spend whatever they want to fix it up.” Of the construction crash of the late 1980s and early 1990s that mowed down builders all across New England, he says, “We didn’t feel that a bit.” True to form, in the current slowdown, Payne’s business has been relatively unaffected. “We are still quite busy, although our pipeline is not nearly as full as it was a year ago.” Payne’s work is primarily remodeling, with project budgets that run from $350,000 to $6 million. “We do $20 million a year,” Payne says. “And we don’t get there by doing a lot of $350,000 jobs. We need a bunch of bigger jobs.” At the time we spoke with him, Payne was negotiating a pair of $1 million projects. “A million-dollar job is right in our sweet spot, and it looks like we’re going to get both of those.”
Payne’s niche is such a climate-controlled environment that he needs a weather report to know when it’s raining outside. “We don’t feel the bumps,” he says, “but it removes us. We don’t have any instincts for the [broader] market, because we’re kind of insulated from it.” When Payne tunes in to the construction world outside these days, he’s picking up mixed signals. One expected sign of a general slowdown has not appeared, he says. “We’re not finding potential employees beating a path to our door.” On the other hand, “Our subcontractors who work for other people are more available now. That’s our market indicator.” As for the future, Payne says, “My sense is that everyone thinks that this little slowdown is just a bump in the road, and that by spring we’ll be going gangbusters.” If so, Payne and his colleagues in custom building and high-end remodeling may yet skate through the business cycle unscathed. Again. It’s good to have friends in high places.
Is the slowdown in residential construction affecting your work? Tell the editors of CUSTOM HOME what’s on your mind. Send your comments and questions to Bruce Snider at bsnider@hanleywood.com.
