Cape construction takes a new tack
by Joseph SantangeloTwo years into a national housing slump, Cape Cod builders are experiencing strength in renovation and remodeling work, particularly among baby boomers approaching retirement. However, the forecast for new construction remains cloudy, except for tear downs and high end buyers looking to build exactly their right house.
Builders are focusing on renovations especially for off-Cape residents now buying their retirement home or second-home owners upgrading the house for impending retirement.
For builders and remodelers in the mid to lower end of the market, phones are no longer ringing off the hook. Contractors have cut back on labor and hiring to control costs. Others have added incentives or boosted advertising to bring in new business. Many builders are retooling their business models to diversify services and add value to customers.
Rob Padgett, president of Padgett Builders of Cotuit and current president of the Home Builders and Remodelers Association of Cape Cod, said, “My indication in my own business and in talks I’ve had with other builders is that [additions and renovations] are definitely on the upswing. In my business, it was a pretty hard winter, but cash flow is up and it could be the best year I’ve ever had.”
He added, “I think what’s happening is people are tired of waiting. They’ve been waiting a year and half to try to play the market out. Now, they are saying, ‘Whoa, we’re not getting any younger.’ They feel they have to move. It’s time to get down on the Cape and begin their retirements.”
At the high end, Peter Polhemus of Polhemus Savery and DaSilva Architects, in Chatham and Osterville, said, “We are busier than we have even been since starting the company, both in homes under construction and design. Looking forward also is solid.”
At the mid-range and lower end, demand is less active. “That is the group most sensitive to economic conditions and would tend to pull back,” said Michael Cole of Cape Associates in Eastham and Barnstable. “But people have plans to retire and they are not going to postpone them. The housing stock also is older and that generates business.”
For the long term, most see Cape Cod as fundamentally attractive, especially to mature, affluent residents seeking to spend all or part of the year near the ocean.
In the meantime, builders are changing with the times. John Wheeler of Wheeler Performance Group is helping builders level out industry peaks and valleys to develop a continuous revenue stream. That includes building on their core competence to expand into interior decorating, kitchen and bath remodeling or security systems.
Mike Tacach of Harwich’s Earth and Stone sees a slackening demand for his excavation work, but a steady flow of patio business and is expanding into landscaping. He said, “I do not expect to hit the numbers we hit last year, because last year we had a phenomenal year, with 65 percent growth from ’05. I’d be happy if we stay even.”
For suppliers, business also is changing. “Additions are more labor intensive,” said Skip Carlton, vice president of Mid-Cape Home Centers in South Dennis, “and the contractors are spending less on materials. We’re changing what materials we sell and what trucks deliver the materials. People do not want huge trucks driving over their lawns, so the delivery fleet has changed over the years.”
New construction, however, is problematic. Inventory of unsold houses remains high. Sales of existing homes during the first quarter of 2007 were slower than a year earlier. Credit standards are tightening and more homes are in foreclosure.
Sellers still outnumber buyers, putting downward pressure on sales volume and sales price. With many existing houses on the market and the high cost of vacant land, new home construction suffers from the competition.
“The market was hot for a long time and this slowdown has been in response to the price escalation that took place during that period,” said Tony Shepley of Shepley Wood Products in Hyannis and Wellfleet. “Until buyers feel that enough of an adjustment has taken place, they will be hesitant to jump into the market. A buyer's worst fear is paying too much; and as prices settle down, that fear goes away. Prices have certainly settled as the market has cooled off. It has become much more of a buyers’ market and buyers will feel good about that.”
Published in Cape Business May/June 2007
Joseph Santangelo Joseph Santangelo has been a statehouse bureau chief, a corporate executive and currently works for the Connecticut Legislature. 
