Sunday, June 22, 2003
Dropping interest rates are boosting business for home improvement contractors.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
YOUNGSTOWN -- John Bartos used to sell customers window replacements a few at a time.
Interest rates on home improvement loans were so high, he said, that many homeowners were forced to make improvements bit by bit.
Plummeting home equity loan rates have changed that for Bartos, a co-owner of House Doctors Window & amp; Door in Girard, and for other home improvement contractors around the Valley.
"We used to have people buying three or four windows one year, a few more the next, and so on. Now, with interest rates so low, they can get the whole house done," said Bartos. "It's been a tremendous help to us."
A partner with Joe Costarella in the 15-year-old business, he said his customers are able to buy at least twice as much now using home equity loans or a home equity line of credit as they would with an unsecured home improvement loan.
For example, he said, a retired Brownlee Woods resident who ordered replacements for all her windows and doors last week told him the low home equity rates made the decision easier. She also hired a contractor to replace the roof and siding on her home.
Better rates than usual
Interest rates for home equity loans and lines of credit have almost always been lower than rates charged for traditional, unsecured home improvement loans, but the gap has been growing.
Local banks are lending home equity dollars at variable rates as low as 4.25 percent, with fixed rates slightly higher, while home improvement loans are in the 12 percent to 14 percent range.
Jeff Brindley of Custom Home Service in Youngstown is sold on home equity loans as an economical way to pay for major home improvements.
He keeps home equity loan applications from several area banks on file for his customers and encourages them to apply for more than one to get the best deal.
Brindley, vice president of the business, said Custom Home has seen some drop-off in business because of the economy, but the larger size of jobs financed with home equity loans has helped.
"It's a slow year, but to tell you the truth, I've noticed more people doing larger projects this year, and less volume," he said. "Instead of 300 customers doing smaller projects, I might have 200 doing larger projects, so it's working out."
The works
With home equity financing covering the cost, Brindley said, Custom Home is getting more orders for what he calls the "trifecta" face-lift: a new roof, new siding and all new doors and windows. For a home with between 2,000 and 2,400 square feet, the average cost would be in the $15,000 to $20,000 range.
Jim Strock, a designer and sales representative at E.H. Duncan Bath and Kitchen Center in Poland, said he believes low home equity interest rates are contributing to a recent upswing in business there.
"We're exceptionally busy now, booking projects way ahead. We're booking into August and September," Strock said.
"I'm sure that the home equity loan interest has a lot to do with it. It's easier to get money, and people want to spend that money on something that will give them lasting value."
Tom Duncan is the owner of the second-generation family business, which started out as a plumbing contractor in 1956 and over the years added kitchens, baths, a heating and air conditioning division and room additions.
Gwen Biasi, a spokeswoman for the National Association of the Remodeling Industry in Chicago, said the home improvement industry is growing steadily and low home equity interest rates are a major factor.
"Generally, a lot of people refinance and use the money to fix up their homes," she said, "so whenever we see another drop in interest rates we know it's going to be good for the industry.
Biasi said the home improvement industry pumped $160 billion into the economy in 2001, the number rose to $163 billion in 2002, and it's expected to grow to $175 billion this year.
vinarsky@vindy.com