Jobs will continue to be smaller in the coming year. Clients will have less money to spend and thus will be price conscious out of necessity rather than just on principle. Borrowing for a home improvement by way of an equity loan in much of the country is largely something of the past, however you will read below that credit card usage is likely to become more common. The need for remodeling will be driven by a need to solve a problem rather than satisfy a whim. Remodeling as an investment—in anticipation of future profits—will likely not exist in most markets because of the glut of low priced homes for sale and lack of available financing. That said, think of this as a 'regional recession'--what's happening in your backyard might be different from what's happening 30 miles away. Generally speaking, where real estate prices went up the most, they have come down the most.
If the forecasts for rising energy costs come true and the push to cut carbon emissions continue, the coming years might be dubbed the Decade of Efficiency. Energy retrofits, remediation and conservation will be the low-hanging fruit for remodelers. Its cheaper to conserve energy than it is to create it. Consider this example: It takes $4-$5 in solar photo voltaics (PV) to generate the same amount of energy that $1 in insulation could will save. In coming years we will likely see a push to conserve potable water, already a code item in CA where drains systems recycle 'grey water' from bathroom sinks and tubs for use in toilets or lawn watering.
Cash for Clunkers and Cash for Caulkers appear to be only the beginning of a long decade of incentives for higher efficiency. Not just cars and buildings but appliances, combined heat and power applications, district heating from co-located waste heat generators, and dozens of other approaches will be vigorously pursued. While new to us, this is not unheard of in today’s world. By the end of the decade the efficiency of U.S. appliances and vehicles may approach what Europe enjoys today.
The largest niche in efficiency will be retrofitting homes with insulation, caulking, windows, and solar generation. Small businesses doing energy auditing and building efficiency upgrades will be winners. In no small part this push towards efficiency will be boosted by new requirements for homeowners wishing to sell their homes to have energy audits performed on their homes such as recently passed in Austin, TX. Other cities are considering rules to go further, requiring the seller to make upgrades (e.g., insulation, caulking, duct sealing, shell sealing.) These upgrades can range in price from $6,000 to $25,000 depending on the size and location of the house. Federal and state tax credits and utility incentives are available to help pay for many upgrades, and the value of these is enhanced by a remodeler who knows the rules and makes it easy for the homeowner to understand and document their eligibility. Find out what's available in for your clients at www.dsireusa.org/
Above is the charging station for the Tesla electric car, a $109,000 toy with 250 horse power capable of a 200 to 300 mile cruise on a 3.5- 7 hr charge. Want muscle--0 to 60 mph in 3.7 seconds! Check out the photo of the current model. Coming--a four door model slated to sell for around $50,000 is slated for release within the year. 
In the category of good news, a few bits of information stand along with energy efficiency as opportunities;
By 2050, the US population is projected at almost 440 million, up from 304 million in 2008. A growing population naturally increases demand for building and remodeling. In 2020 there will be 100 million people over 55 years of age, 29 percent of the population, up from 21% in 2000. These baby boomers appear likely to postpone retirement out of necessity to manage household debt or perhaps just by inclination. Remember these were the people who saw their retirement funds shrink by 25-75% in 2008 when the stock market crashed. Whatever the motivation to keep working, this means there will be some disposable income for this growing niche and a need to make their homes more friendly to their geriatric needs. World wide the population over 80 is growing faster than any other age group and will continue to grow rapidly until at least 2050, meaning Age in Place and other geriatric remodeling demands will likely be increasing in your market.
Almost one quarter of elementary and high school students are immigrants or have immigrant parents. Doing business with foreigners demands that the remodeler cultivate special skills. Those with these special skills often have exclusivity in this niche market.
Finally, internet usage is virtually universal: 92% in 2009, up from the 72 percent in 2000. The savvy remodeler will take advantage of this opportunity to catch and keep more clients. Internet marketing by way of web pages, blogs and newsletters offers more opportunity at with costs decreasing continuously. Remodelers should take advantage of www.blogger.com/start to open a google email account for free and then create a blog quite simply and also free.
2010 Predictions —I don't believe we've seen the last of financial time bombs. What's more, I expect:
(a) real estate prices will continue falling,
(b) unemployment will continue rising,
(c) our economy will continue contracting,
(d) our stock market will mirror the deterioration of these economic woes, and
(e) inflation will reappear late in 2010 of shortly after.
Here are (several) areas weighing down projections for the next 10 years:
Homeowner Spending
An estimated 2.4 million foreclosed homes will be added to the existing glut in 2010, driving home prices down by another 10 percent or so. When real estate prices move upward, everyone has instant equity and banks are eager to loan money on perhaps the most secure asset of all—your personal home. When real estate prices move down, equity disappears and lending to homeowners dries up.
With today’s severe downturn of real estate prices--despite the current administration’s anti-foreclosure efforts--at the beginning of this year an estimated one third of homeowners with a mortgage (nearly 16 million people) owe more than their homes are worth. This is a huge problem for remodelers that won’t disappear for many years. Three states that led the nation in foreclosures in December ’09 also posted the highest rates for the entire year; Nevada, Arizona and Florida. More than 10 percent of Nevada housing units received at least one foreclosure filing in 2009, with Florida and Arizona following with about 6 percent each. The top 10 states for foreclosure; California, Utah, Idaho, Georgia, Michigan, Illinois, Colorado and of course Nevada, Arizona, and Florida. Those who are not in danger of loosing their homes are understandably cautious of spending money because of uncertainty in the economy as a whole.
According to reports from the Brookings Institute, people are tied to existing homes, can’t sell because of decreased values, can’t get loans for new ones and won’t move without job commitments. Only 1.6% of US citizens are now moving across state lines, half the rate of a decade ago.
Something more to consider relating to homeowner spending, the number of people in their peak spending years (around age 50) will also start to decline as baby boomers age.
Commercial Real Estate
I’ve mentioned before that the next shoe to drop could be commercial real estate. Shopping malls with vacant shops are one factor. Vacant office space resuting from labor force trimming is another. This spells more problems for banks holding the mortgages on these properties, though not nearly as big as the home mortgage problem.
Business Spending
Just try to get an operating loan to start up or keep your remodeling business afloat today! Low interest rates don’t help anyone when there are no loans being made. Additionally, businesses don’t hire when the outlook for future work is questionable. In our country start-up businesses are financed with home equity loans more often than not. I have often said that the liquidity of homes in the U.S. is one of the major differences between our land of opportunity and most third world countries, Mexico for example. With respect to funds available for start up businesses we are on par with many third world countries today. The land of opportunity is now the land of homeowners imprisoned by out of scale mortgage debt.
Government Spending and Regulation
With 36 states in deficit position due to under-funded pensions, budget cuts will result in layoffs. Likely a bailout of state pension funds could fall to the federal government. Local, city and state governments will continue looking for revenue-- meaning increased regulation (more registration and licensing fees for contractors.) Building permits (taxes) will go up in price. Some cities are outsourcing entire building departments now as a way to cut expenses. Higher taxes and increased regulation could put a damper on demand, slow down job-site production and drive up prices.
For example, remember by April 22, 2010, the EPA is requiring any contractor that is working in a home built prior to 1978 to be certified in using lead-safe work practices. The required remediation procedures for lead, as well as the training and supervision requirements are driving up job costs. It is not likely the average homeowner will put any value on this extra measure of safety, regardless of the validity of the threat.
As well, by January of 2011, new one and two-family homes will be required to have sprinkler systems. In the near future it will be up to the individual city or county to determine at which point (if any) a remodeling project would cross the line and require a retrofit of the existing house with sprinklers. (Some states and cities have opted not to play by these rules for now.)
Competition
The builder is once again the remodeler’s competitor. So is the handyman. Many young people will delay or abandon attending college for financial reasons, perhaps becoming the newest pool of low-cost competition or otherwise increasing the labor pool.
Productivity
Technological breakthroughs that could significantly increase productivity have never radically changed the remodeling business. Some forecast that we will see more new housing built in the factory and at some future date-- this could lead to a niche for remodeling factory built homes.
However there new technology could change how we get paid for home improvements—this should be considered an impact on productivity in sales for remodelers and handyman businesses. I have always professed that if you give the consumer more ways to pay, they will buy more. We will soon have the ‘Square,’ a gizmo not much bigger than a sugar cube that plugs into the audio jack of the Iphone.
Square’s soon to be launched service will make it possible for pretty much anyone to accept credit cards easily. Many contractors have been avoiding accepting credit cards for their products/services because of the related costs. The Square, which reads the magnetic stip on credit cards is free, the related software is free as well. There is no sign up fee, monthly charge, contract, or obligation to actually use the product. Surely there will be a transaction charge, but no ongoing overhead associated with the service. Soon Square will work with the Blackberry and Google’s Droid as well. In the true American spirit, already competition is springing up. Keep an eye on this!
Summary
Recovery from this recession is unlikely to follow the sharp V-shape pattern many economists were expecting. There are near-term factors related to the recent downturn, as well as longer-term changes in the makeup of the economy that could lead to a decade of slow growth. The biggest unknown is whether or not we have created a new psychology for the current generation of young adults, the recession generation, given that we have are experiencing the worst economic period in 70 years and considering a recent study by the National Bureau of Economic Research (NBER) released this past September. Data from 1972 to 2006 shows that one really tough year experienced in early adulthood is enough to fundamentally change people’s core value and behaviors.
We know well the depression generation who save their tea bags for tomorrow. Next came the baby boomers with continuous upward mobility and possibility. The baby boomer spent more than they earned because it was true that times only got better. There are studies indicating the recession generation may invest more conservatively, tend to make less money, choose safer jobs and believe in wealth redistribution and more government intervention.
What can you do to survive? Here are some good ideas for your action plan--
· learn to price their work more quickly and accurately
· put systems on place to create inquiries
· learn to sell more efficiently--to find a description and reviews of my book;
If I Sell You I Have a Job,
If I Serve You I Create a Career!
as well and an order form, click or copy and paste the following link; https://docs.google.com/Doc?docid=0AaY6QBOoCxQ_ZGZtN2RuaGhfOWhoZHB2NHhr&hl=enhttps://docs.google.com/Doc?docid=0AaY6QBOoCxQ_ZGZtN2RuaGhfOWhoZHB2NHhr&hl=en
See more about my seminar schedule and other speaking events, books and software at http://www.techknowledgeonline.net/ . Feel free to email me with questions or comments at mike.gorman.email@gmail.com .
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