The building slump is giving
homeowners an opportunity to
do more with less when they remodel

By Jerry Tune
Star-Bulletin

Carolyn Tari-Sanchez relaxes in her recently remodeled Manoa home and thinks about what a difference timing can make. The home's entire main floor was redone as part of a phased plan designed by architect Wayson Chong.

The job removed a wall which separated the upper floor into two living units, one for a tenant. After 10 months of construction, the entire floor was opened up for a living area, master bedroom, kitchen, bathroom and media room.

Thanks to lower construction costs in the current six-year building slump, the Tari-Sanchez family was able to to splurge on a "media room" with a drop-down movie screen.

"I think they saved 10 to 15 percent from what contractors were charging a few years ago," said Chong.

Many homeowners are aware of the construction slump and are taking advantage of it to get the best deal on home remodeling work.

"We needed more space and thought the time was right," Tari-Sanchez said. "The construction (slump) was part of that decision."

Contractor John Sutton, owner of J. Sutton Construction Co., says now is a great time for homeowners to consider that small or not-so-small remodeling job. Contractors are hungry and talking to everyone about getting work.

"We're actively chasing work by talking to architects and property managers," Sutton said. "We've even gone door-to-door."

For the Tari-Sanchez job, Chong said there were three bids and it took about a month or so to do all the negotiations. Names of bidders were checked with the state Office of Consumer Protection to find out if they had any problems.

"My rule is that if the contractor has had any black marks in the last three to five years, I won't use them," Chong said.

By Ken Sakamoto, Star-Bulletin
The Tari-Sanchez family splurged on their multimedia
room with drop-down movie screen.

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In these difficult times, some contractors cut costs too much and then try to make up the difference by change orders after the remodeling is underway, Chong said.

"You always want to deal with a licensed, reputable contractor," Chong said. "You don't want the contractor to take a dive. He needs to make a fair living."

Contractors say the last six years in Hawaii have been extremely difficult. As fewer jobs are done, they contractors must do smaller jobs and drop costs.

Sutton said he is currently doing a few small jobs -- but he hasn't started a new home project this year.

"Normally, we do two or three homes a year," Sutton said. "Two years ago $100,000 was a little job and now its a medium-sized job."

It's difficult to describe savings to homeowners, since each job is different. But Sutton puts it this way: "We've held costs to homeowners constant for five years even though aggregate concrete costs have gone up 25 percent, lumber has fluctuated and insurance and health care costs (for employees) have gone up."

"We're doing work for a lot less profit margin," he added. "Gross profit five years ago was 20 to 25 percent but today it's 16 to 17 percent. With overhead running at 13 to 14 percent our net profit today is only 3 to 4 percent. Five years ago, it was 6 to 8 percent."

Sutton recently closed down his office and is working out of his home office in Kahaluu.

"We're busy but cut our work force 40 percent," Sutton said. "Gross sales are down 25 percent from last year."

With downsizing comes the ability for companies to take smaller jobs. That means small contractors also move down the ladder to look for smaller jobs than they normally do.

Ross Reid, an individual general contractor, has worked on commercial office buildings this year but those jobs don't come along as often nowadays. "I've also been doing $2,000, $3,000 and $4,000 jobs and I'm happy to get them," Reid said.

There is not much profit in these small jobs, Reid said. But contractors view it like they are "working for wages" and the small jobs fill in the time between larger jobs.

In the booming 1980s, City Construction did high-end homes on Hawaii Loa Ridge and had 29 employees. Today the company has been downsized to 15 people and the typical job is a modest new home replacing an old home.

"We use do $800,000 and $900,000 homes and start a home every two months," said David Asato, company president. "Now a typical job is $200,000 and we start two jobs a month."

City Construction, based in the Pearl City Industrial Park, started in 1979 and has weathered other slow periods.

But in the current slump, Asato has added something new. The company gets permission from clients to hold an open house for one weekend after the job is finished -- and before the home is turned over to the client. That enables the neighbors to come in and take a look at the work.

"It's been pretty successful for us (in getting new business)," Asato said.