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"The Sign of Renovation in Your Neighborhood

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News

High Housing Prices Add Up to Renovation Boom

About Remodeling

Richard Lufrano, Contributing Writer May 2000

"High Housing Prices Add Up to Renovation Boom"

The Atlanta Business Chronicle- May 17, 2000

Richard Lufrano Contributing Writer

Two years ago, Marjorie Bowers and her husband decided to look for a new home. With their two children having flown the coop, the couple began poking around the Druid Hills area to see what was available. What they found were astronomical prices ranging from $700,000 to $1 million for three-bedroom houses with less space than their current abode and no back yards.

The Bowers, who own a home that was part of the Randolph Hearst estate in Brookhaven behind Ogelthorpe University, had two options. They could shell out a ton of money and pray the decade-long real estate boom continued unabated, or they could hire a remodeling company to make an addition to their current home for half the price. Their decision, typical of ones made by throngs of Atlanta homeowners, is providing local remodeling companies
with more business than they know what to do with.

Incredible growth

As interest rates continue to rise, and the stock market bubble continues to burst, the market for new homes in Atlanta may be slowing. As previously reported in Atlanta Business Chronicle, American Metro/Study Corp., a company that tracks local housing, reported that the inventory of completed but vacant homes at the end of the first quarter was the highest it has been in years. That's good news for companies that specialize in remodeling.

Bret Roderman, president of Atlanta Window and Energy, operates in a faster market. Roderman's company installs energy-efficient windows and sidings on older homes. The company does a majority of its work inside the Perimeter in places such as Stone Mountain and Buford. Atlanta Window and Energy charges approximately $400 per window and, depending on the size of the job, can have an entire house of new ones installed in four to eight days.

For Roderman, the '90s has been an incredible run. Last year the company, which also operates its own mortgage business, allowing customers to pay for work in installments, had more than $5 million in revenue.

"If you're doing new construction right now, you're lucky to get a 12 percent profit margin," Roderman said. "Our profit margin is 30 percent. Because we own our own mortgage company, we can help an owner refinance and use the savings to help pay for the improvements. Right now we have about 14 jobs on backlog. It's an amazing time."

A bright future

For every action there's an equal and opposite reaction. If that's true, you would think the stock market decline would impact the amount of money people are looking to spend on their homes. Carl Seville, vice president of Sawhorse Inc., paints a different picture.

"We usually get around 30 or 40 calls per week, and we haven't seen a drop off from that," Seville said. "This time is different than 1987's drop. People have the confidence of a 10-year bull market behind them. At some point, there will be a recession. But if you remember back to 1990 and '91 when housing prices in Atlanta dropped, people knew they couldn't get what
they paid for their homes so they decided to wait it out. And while they were waiting they decided to improve what they had so that, when the market turned around, their homes would be worth more. I think we'll see that same trend the next time around."

Sawhorse was started in 1979. The company, which grew from 29 to 40 employees last year, had $7 million in revenue in 1999. Seville predicts that figure will grow to $9 million this year. Working mostly inside the Perimeter in Virginia-Highland, Morningside and Ansley Park, Sawhorse does not focus on high-end multimillion-dollar renovations.

"If you take on one huge project, and a recession comes and the people decide to back out, then you lose a huge percentage of your business," Seville said. "We'd rather be involved with a variety of moderate projects so that our business is more stable."

After Marjorie Bowers and her husband made the decision to renovate their home, the couple turned to Sawhorse for assistance. Describing her home as a typical "Cape Cod house built in the 1960s when all the rooms were chopped up," Bowers had Sawhorse knock out a wall between the living room and the hallway. Sawhorse also added a master bedroom, master bath, a new kitchen and a "mud room" (a room added for laundry or other work).

The entire project, which took two years, was completed two months ago.

"We started a movement," Bowers said. "People realized that this area [Brookhaven] was a great place to be. Now, if you look around this area, you see everyone renovating."

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