At-home micro offices, deck remodels, roof reshingling drive demand for remodeling

Call just about any contractor in Sioux Falls for a home remodel and they’ll likely tell you they’re booked out for the foreseeable future.

That’s the case with Cory Hjellming, vice president at Hjellming Construction, who said he has more than a year’s lead time for new projects.

Sioux Falls is on track for near-record-breaking numbers for housing remodel permits because of the demand.

Through July, the city of Sioux Falls reported $62.8 million in housing remodel permits, which is well ahead of last year’s $38.4 million total.

The record year was in 2014, which had $120 million in housing remodel permits.

This year’s numbers could come close to breaking that record or surpassing it as the demand for housing renovations continues. A combination of housing upgrades, including adding micro offices as working from home becomes more common, and roof reshingling is leading to the surge.

“We’re taking on as much as we can,” Hjellming said. “Basically, we have to say no. We’ve had to say no for the last two years because we can only handle so much.”

About $11 million of the remodeling valuation comes from reshingling permits, said Butch Warrington, Sioux Falls’ chief building official. A majority of the 1,594 permits issued through July are for homes in western Sioux Falls, likely caused by storms earlier this summer, he added.

Contractors like Hjellming are seeing a steady increase of interest in deck remodels and housing remodels over the past year or two as well. Their schedules are full, caused mostly by clients adding on projects while working at the house instead of an influx of clients, said John Beatch, co-owner of Beatch Construction and president of the Home Builders Association of the Sioux Empire.

People waited for so long because of the pandemic, increasing costs and inflation, and they’re hoping to knock out all of their house remodeling projects instead of waiting another few years, he added.

“All of the projects are getting larger at the same time there are more of them,” Beatch said. “The comments we’ve gotten lately are that clients have been waiting to do stuff for years and want to start investing in their home. They’re seeing their neighbors do stuff, and they think they should get this done too.”

Composite decks that require little maintenance are popular, as are lavish paved patios –all places for families to gather together — though Warrington said building permits for decks are standard compared to the past few years.

Here’s one before-and-after project from Hjellming:

Micro offices are an emerging trend with more people working remotely after the pandemic, Hjellming added.

Nearly 60 percent of Americans can work remotely at least part of the time, according to a McKinsey & Company study, and more job candidates are looking for remote work.

The micro offices are small 6-by-8-foot rooms with enough space for a desk and working. Hjellming first saw a micro office project about five years ago. This year, Hjellming Construction has done about 10 projects involving a micro office, he estimates, which would make up about 20 percent of the company’s annual number of home remodels.

The tight housing market is pushing families to remodel instead of searching for another home. While current interest rates are still relatively low, moving to a new home would mean double the interest of what many families are paying after refinancing during the pandemic.

And while it would be easy to sell a home in the 2021 and 2022 housing market, it would be a different story to purchase a new home, said Shad Carney, a real estate agent with the Tyler Goff Group at Hegg Realtors.

Carney and his family are choosing to forgo the juggling of selling their home and buying another by remodeling their current house. The family is basically building a new home on their lot by building additions and remodeling in stages.

The Carneys moved back to Sioux Falls about six years ago as a family of four. Now, they’re a family of six sharing a three-bedroom, two-bathroom home in southern Sioux Falls. Carney hired Beatch Construction along with other designers to help work on the house and add more bedrooms and bathrooms to suit the family’s needs.

The northern part of their home, which included a garage and upstairs loft, has been torn down and will be rebuilt as a garage topped by three bedrooms and two bathrooms. The Carneys will “relocate” to that wing of the house once completed, and remodeling will begin on the rest of the house.

“It would be cheaper for us to move our family somewhere else — just move out and not do all the renovations,” Carney said. “I know that professionally, but because of the neighborhood and how much we love our house, we’re willing to put extra money into it.”

He suspects that other families remodeling their homes across Sioux Falls have similar reasons. Even with inflation and high labor costs, the Carneys felt this was the right time to remodel before their children entered high school.

“For a lot of people, I’m guessing they’re thinking, ‘we’re paying off the house faster with our refinanced rate, so we’ll just stay here. If we don’t like it, we’ll make it what we want,’” Carney said. “They’re probably not in any rush either. It’s hard to get a contractor, plumber, electrician, what have you, because they’re busy and booked out anyway.”

Hjellming has 15 employees in the field. Companies are looking to hire construction workers and tradesmen to meet demand, but it’s still difficult given the labor shortage and South Dakota’s low unemployment rate of 2.3 percent.

“We used to advertise and give better deals or negotiate numbers, but now it’s basically ‘here’s your price, take it or leave it,” he said. “We’re seeing that same problem with vendors and subcontractors. It’s becoming a fight over who gets what plumber this week.”

Hjellming predicts that this high-demand and full-capacity trend will continue in Sioux Falls for the next four to five years.

His current clientele for housing remodels are cash clients. Given interest rates, those clients aren’t scared of tackling projects now. After people adjust to higher interest rates, potential clients taking out loans will start searching for remodelers.

The Home Builders Association of the Sioux Empire will host its remodeling showcase Oct. 1 and 2 from noon to 5 p.m. Homeowners interested in remodeling can tour indoor and outdoor spaces to see what is trending for home remodels in the area.