Kolbert Building In The News


Dan had an article in the Journal of Light Construction about a tricky framing detail on our sunroom project.


Dan was recently quoted in the Portland Press Herald about rising interest rates’ effect on the home-building boom.

End of the boom for remodelers?

Edward D. Murphy, Portland Press Herald Staff Writer

The home remodeling boom of the past few years may be coming to an end because of the same factors that fueled it: interest rates and heavy borrowing based on rising house values.

This time, however, interest rates are rising instead of hitting record lows, and the money borrowed over the past few years has been spent, leaving homeowners with loans to repay. And that adds up to a downturn for the remodeling and renovation business.

“The industry was a bit overheated for a couple of years,” said Kermit Baker, the director of the Remodeling Futures Project for the Harvard Joint Center for Housing Studies. “It’s certainly coming down from the plateau.”

Remodeling is a huge business nationally. Baker’s research determined that homeowners and renters spent $233 billion on remodeling in 2003, according to a report released last year by his project.

Since the Federal Reserve started cutting interest rates in 2001, there has been a surge in the number of people refinancing their homes or taking out home equity loans. Many homeowners funneled a significant portion of that money back into improving or adding on to their homes.

In late 2004 and early 2005, spending on remodeling was growing at a 20 percent clip, but that figure fell to 4.5 percent in the Joint Center’s most recent Remodeling Activity Index for the first quarter of 2006.

The group is forecasting that spending will continue to grow around 5 percent a year, which is considered a long-term average. But Baker noted there are some variables that could affect that prediction, including the cost of energy, which is both adding to the cost of materials and taking a bigger bite out of homeowners’ wallets.

“There’s more risk on the downside than the upside of that (forecast),” he said.


Bill Harris of Harris Contracting in Portland said he can tell the market is softening by his quieter phone.

“There are fewer calls,” said Harris, who has had a remodeling business for 20 years.

“I would probably say about 30 percent less. Along with that, (there’s) a more price-conscious attitude on the part of many people because they’re paying higher interest rates,” he said.

Of course, higher interest rates tend to discourage people from selling a house and moving to something bigger and better. Partly as a result of those rising rates, the real estate market is also cooling, meaning homeowners couldn’t get as much as they might have hoped for their current house if they decided to try to make a move.

Usually, that combination means a bit of a boost in remodeling activity because people will add a room or make some other improvement instead of moving, said Valarie Lamont, who heads the Center for Real Estate Education at the University of Southern Maine.

But there’s less money to do that, Lamont noted. Many homeowners cashed out equity in their houses during the refinancing wave of 2002-04, Lamont said.

Others took out home equity loans – sometimes with variable interest rates – at the same time, paying for vacations or a new car or just paying off credit card balances.

Now, with interest rates rising, the cost of paying back those loans is increasing, and that means there’s nothing left over for remodeling, Lamont said.

“People are tapped out right now,” she said. “There’s concern out there because people are leveraged to the max. People were cashing out for significant dollars, not just a few thousand, but 20, 30, 40 or 50 thousand.”

That’s apparent to those in the remodeling industry.

“People are a little more concerned about money than they have been,” said Dan Kolbert, owner of Dan Kolbert Building and Renovation in Portland.

Kolbert noted that most contractors who specialize in remodeling are small operations, so a slowdown could just mean he turns down fewer jobs and catches up on any backlog.

“It doesn’t take a huge amount of work to keep us busy,” he said, “but logic says it’s going to slow down.”

Kolbert said one thing he stresses to clients who are on the fence about doing a project is that new materials mean that an addition or redone room is likely to be more environmentally friendly and definitely more energy-efficient than the rest of the house. He said better insulation and a higher overall quality of building materials has led to those advances.

Kolbert said one of the worst things about a housing slowdown would be if contractors who have been working on new-home construction turn to remodeling to keep the money coming in.

“That’s what concerns me,” he said, “competing with people who really don’t know what they’re doing.”

Harris said that, in a way, he welcomes the slightly less frantic pace.

“I’ve been working six and a half days a week for three years,” he said. “I could have easily worked eight, except I couldn’t get anybody to pass a law for an eighth day in the week.”

The slowdown also is helping to keep down labor costs, Harris said, and he’s been able to find more qualified construction workers who aren’t asking for as high an hourly rate as they would have last year or the year before.


Baker’s research has indicated that people with high incomes and high-priced homes tend to make up the lion’s share of the remodeling market, spending much more on home projects.

But in a soft economy, high-end projects are just as vulnerable to a downturn as remodeling for lower-income homeowners because high-income homeowners usually will factor in the return on their investment, Baker said.

When home values are rising sharply, homeowners figure a remodeling project could quickly pay for itself through a higher selling price if they decide to put their home on the market. But with price increases moderating, they may figure the new or redone room isn’t going to lead to a considerably higher price for the home.

Baker noted that the picture might be a little brighter for remodeling contractors in Maine than in some other parts of the country. With an older housing stock, there’s likely to be more work for contractors here than in regions where homes are newer, he said.

Staff Writer Edward D. Murphy can be contacted at 791-6465 or at emurphy@pressherald.com.

Rick Renner explains how a green roof helps the performace of his LEED-H Platinum home in the video from Fine Homebuilding.