There are widespread reports of the resurrection of the housing market. National data due out this week are expected to show a bump in sales of both existing and new homes. But for the small businesses supported by the industry, it’s been a long slow journey out of the deepest housing slump in a generation.
Lorey Cavanaugh is giving a tour of her West Hartford showroom, Kitchen and Bath Design and Construction. Cavanaugh has decades of experience in this business, and started her own company in 1990. After continuously expanding through the good times she describes the events surrounding the financial crisis as dramatic and scary.
“It was literally as though somebody had turned the tap off, that the water had just been turned off. The phone stopped ringing, to the extent that I would pick up the phone thinking there was something wrong with it.”
At the time, she had two stores in Litchfield and was renovating a new eight thousand square foot showroom in West Hartford. Things went from bad to worse and as the phone stayed on the hook she eventually found herself meeting payroll on credit cards.
“I actually called a friend of mine who’s a very astute business person, and said, I am in deep trouble. I don’t know what to do next – what are my options? And she came and spent a day with me on a Friday, brought her laptop, crunched numbers with me, and called me over the weekend and said – you need to fire everybody and sell everything.”
Reluctantly Cavanaugh agreed. She went from a 23 employee business to just two employees. And for two years she operated without a brick and mortar showroom. But she refused to give up.
“The competitiveness was, how to design the projects more cost effectively, make trade-offs in materials, do those kinds of things, so that people could still access the company, but at a little different price point than they might have before.”
At one point she contemplated bankruptcy, but in the end she struggled through and reestablished herself, opening this new, more modest premises near West Hartford center.
But Cavanaugh says there’s definitely light at the end of the tunnel.
“Last year things really started to percolate again, people started to feel some sense of confidence. And this year, we are in a boom cycle in my business – things have taken off like crazy.”
That big revival in the renovation business may not necessarily signal the pick up in home sales. She says the majority of her business is actually driven by those people who’ve decided to stay put.
“They like the neighborhood, they like the school system, they like their landscaping – all of that, so they decide they’ll take the basic house and make it be what they would want in a new home.”
What she’s seeing in fact, seems to be a return of confidence and the pent up demand of homeowners who’ve undertaken no major projects for five years or more. Not far away, at the West Hartford office of realtors Re/Max, Lou Mira is also experiencing pent up demand of a different sort.
“You can see homes that are selling under multiple offers within the first week on the market.”
He says it’s a good many years since that’s been the case.
“We’re actually having a shortage of listings, if you will, in the marketplace compared to buyers available. That’s when you start to see the trend start to swing with the prices increasing.”
But so far those prices on average, are still stagnant. One measure that has risen though, is the median price of sales. That increase indicates that more deals are being done at the higher end of the market – more expensive homes are the ones doing well.
“A couple of years ago, we had, you know a lot of first time home buyers entering the market specifically with the tax credits that were offered by the federal government. With those gone we continue to see an improvement now with the move-up buyer.”
An overall increase in real estate prices, which many would count as the true housing recovery, is still in the balance, according to Tim Warren, the CEO of The Warren Group, a company that aggregates real estate sales data around New England.
“Prices are still falling modestly, and that opens up opportunities for homebuyers to drive a hard bargain. I think prices will level off by the end of the year. That’ll only happen though if we see sales volume picking up in the second have of the year.”
Even if the recovery is sustained, many professionals say the industry will never be the way it was, and part of that is the new cautious mindset of those who lived through the downturn. Lorey Cavanaugh at Kitchen and Bath Design Consultants in West Hartford says she may be busy these days but there’s one thing she’s not contemplating.
“The idea of taking on a loan to hire people, not knowing what’s around the corner – I am extremely reluctant to do that.”
Having grown exponentially in the good years, she says it’s going to be a long time yet before that mindset returns.
“I’ll keep the business small, I’ll work longer hours, I’ll have people wait, but I am very reluctant to grow the business. We got burned really badly.”