The world of real estate and remodeling is a complex one. As the economy fluctuates, supply chains struggle, and outcomes are uncertain, how can we understand the market?
John Burns Real Estate Consulting and Qualified Remodeler strive to clear things up with their US Remodeler Index. Created by polling a massive group of contractors, the Index gives an unprecedented look under the hood of the industry. This quarter only, the Index is being offered for free at tinyurl.com/remodeler-survey.
Eric Finnigan, VP of Research and Demographics for John Burns, manages several industry reports including the Index. In this interview, he sheds some light on the remodeling industry’s prospects, give advice for differentiating your contracting business, and shares his unique perspective.
Follow Eric on Twitter, @EricFinnigan, connect with him on LinkedIn, or shoot him an email at efinnigan@realestateconsulting.com.
This podcast uses the following third-party services for analysis:
Podtrac - https://analytics.podtrac.com/privacy-policy-gdrp
Chartable - https://chartable.com/privacy
Eric Finnegan:
Speaker:We've estimated that as a country we need about 17 million homes built between 2020 and 2030 just to reach equilibrium in the housing market by the end of this decade. So if we take that 17 million and how it's already been built, we need about 1.8 million actually built every year for the next eight years to just reach equilibrium by 2030. That's mind blowing to me. We haven't had that level of construction happen in 20 years.
Todd Miller:
Speaker:Welcome to the Construction Disruption podcast, where we uncover the future of building and remodeling. I'm Todd Miller of Isaiah Industries, manufacturer of specialty metal roofing and other building materials. Today, my co-host is Ryan Bell. Ryan, how you doing today?
Ryan Bell:
Speaker:I'm doing great, Todd. How are you?
Todd Miller:
Speaker:I'm doing well also. You know, we're recording this on a Friday, so we're wrapping up a hectic week. I was out in the field a little bit this week, visited some folks down in Kentucky, and that was great. You know, we continue to just be blessed by a vibrant industry, that's for sure.
Ryan Bell:
Speaker:Yes, absolutely. Did you happen to see your valentine when you were down there?
Todd Miller:
Speaker:Well, she was waiting for me when I got home. So that was that was kind of cool. I hear you may have a couple stories for us or a couple of things to share.
Ryan Bell:
Speaker:I do, actually. I've come prepared with a few dad jokes to share.
Todd Miller:
Speaker:Awesome.
Ryan Bell:
Speaker:I always love having these in my arsenal. How do you make holy water?
Todd Miller:
Speaker:How do you make holy water? We have unfortunately made some holey metal roofing a couple of times, but I'd rather not talk about that. I don't know. How do you make holy water?
Ryan Bell:
Speaker:You boil the hell out of it. Is that going to earn us another explicit rating?
Todd Miller:
Speaker:There we go with the explicit rating, okay.
Ryan Bell:
Speaker:What's the best way to watch a fly fishing tournament?
Todd Miller:
Speaker:I don't know. That one I don't have a clue.
Ryan Bell:
Speaker:Live stream.
Todd Miller:
Speaker:Livestream. Good stuff. Thank you, that's always fun. So one thing I won't clue our audience in on also. We have done something the last few episodes called Challenge Words and our guest is in on it this episode as well, where we have each each have a challenge word that we are challenged to work into the conversation somehow. And you the listeners can be listening to see if you pick up on, and think I wonder if that was a challenge word. And at the end of the show, we will all report our success or lack thereof, on getting our challenge words into the conversation. So anyway, in today's episode of Construction Disruption, we have a guest who is a nationally recognized go-to expert in residential construction and remodeling. With us today is Eric Finnegan, vice president of research and demographics for John Burns Real Estate Consulting based in Boulder, Colorado. Eric's work consists of researching very important questions in the housing market and also the building products space. Eric, thanks so much for joining us today.
Eric Finnegan:
Speaker:So glad to be here. Thanks for the invite.
Todd Miller:
Speaker:Well, I look forward to our conversation a great deal. I know that you'll have a lot of good stuff to share and I follow your company a little bit. And always your insights are always tremendous and great information to help those of us who are trying to navigate our way through this industry, which every year brings new opportunities and new challenges and new things. So that's exciting. So I know that you have a master's degree in economics from Fordham University. I'm curious to know a little bit about your own history. What led you to be where you are today?
Eric Finnegan:
Speaker:Well, that is a, I would say my start in the industry was in 1999. I started working for a landscaping company in high school, and I did that for about six or seven years in springs and summers. And I still think that was my favorite job of all time. That was going back over twenty years ago now. But after college, I got really interested in urban planning and ended up working with a housing research company starting in '07. And the first, if I remember, the first day on the job was August, I think 9th, 2007. Which if anybody remembers when what was happening around that time, the housing market was in the middle of crashing. And the full scale of the bubble that had just inflated over the last three or four years was finally bursting.
Todd Miller:
Speaker:Sure.
Eric Finnegan:
Speaker:The Federal Reserve chairman at the time, Ben Bernanke, started injecting emergency liquidity measures into the market. I remember seeing that on the news and thinking, what is this? What's going on? I don't understand any of this. I'm straight out of college. I just finished like a six month road trip with a bunch of friends and now I'm sitting at my desk and it seems like things are crashing down all around me. So fast forward, yeah, that was 2007 and so it's about 15, 14 years ago now. I've been in the industry since since then doing forecasting, analysis, research for housing, different real estate asset classes, and most recently joined John Burns Real Estate Consulting at the end of last year, 2021 in the building products group. And so that's been a really eye-opener because of how much data we collect on a monthly, really weekly, monthly, quarterly basis. Or when I got into the industry 15 years ago, there was almost a scarcity of information and data on housing and remodeling. And now there's just too much. So one of the roles that I think we play, and I try to play is is a filter or I help companies interpret what's actually happening. And you mentioned the master's degree in economics. I use that sometimes. I find thinking like an economist can be a blessing and a curse. And when I'm talking with with clients, because people in the construction industry or even housing industry, you know, if I say the word elasticity, they don't know what I'm talking about. And it's a really fun, interesting challenge to translate the research and analysis and forecasting that we do into plain English so that really anyone can understand it. That's a little bit about how I got here.
Todd Miller:
Speaker:Very interesting. And it's interesting where you said so much more information is available than used to be available and you're spot on. And I love that stuff. But on the other hand, I think some people read it and they just start snoring. So we just, we all do with it what we can. But, you know, it's interesting, my wife and I this summer have gotten into watching baseball games on television, something I haven't paid attention to baseball in several years. Life was too busy. And but man, I can't believe the statistics and information they have for sports now, too. And, you know, some of the obscure stuff that these guys pull out is just incredible. So we definitely live in that age of statistics and information and figuring out what the heck we can do with that all to make the world better and make our lives better and businesses better and all that. Well, what? Help us understand a little bit more, if you would, about John Burns Real Estate Consulting. I mean, what's the total scope of the work you guys do? Who are your typical clients? I'm just curious to hear about that.
Eric Finnegan:
Speaker:There's a few different groups within within our company that serve different needs of the industry. But I would say any any company or investor that wants to understand what's happening in the housing market or the building products space, we are generally either already collecting data on that to answer the question, or we can design a custom study to really answer that question. So that could be homebuilders, developers, private equity firms, investment banks that may be looking to acquire a company or run a merger. We also work with building products manufacturers, building products dealers, independent lumber yards, you know, retailers that sell into the home improvement industry. The one common thread is that there's a need to know actually what's happening in the housing market, what are the big picture themes, what should they be thinking about? And they really come to us to for really assistance on that.
Todd Miller:
Speaker:Interesting, and you know, when I think about that, we've had a couple of past guests who I know had mentioned you folks. One was Mark Mitchell, who does a lot of work with marketing for building materials. And I think the other was Robert August, who is a guru in the real estate industry. And it's interesting what you said, private equity firms, because we are seeing so much activity by them in all facets. I mean, it seemed like for a while we saw them on the product end of things, but now they're all over the construction end of things as well. So makes every bit of sense. You know, one of the things I've seen over the years from my perspective is I'll see homebuilders, especially the bigger guys, trying to pay a lot of attention to research and data from our industry. But I haven't seen remodeling and what I call replacement contractors paying that much attention to the information that's out there. How do you feel the information that you folks come up with can benefit, you know, say, a remodeling or what I call a replacement contractor? And what I mean by that, as someone who does windows, roofing, siding replaces some of those products that eventually have to be replaced in a home. How do you think they can benefit from the information you folks provide?
Eric Finnegan:
Speaker:Well, I would say that most of them probably wouldn't benefit. It's a little strange to say that. But what I know about contractors, especially in this small, you know, maybe it's a one-person shop or they have got a couple of employees, they're really focused on doing a really good job. And it's a real like craftsman mindset. And you mentioned the home improvement or the replacement contractors. It's one of the most stable parts of the economy. Even though, you know, housing goes up and down. Replacement contracting is just very level because homes are always in need of repairs, replacements. And that happens across the economic cycle in recessions and expansions when housing is booming or when housing is crashing, and a lot of the contractors are good just doing their business, taking care of their clients. Where we do help is there, I'd say there's a fraction of that group that might want to think more strategically about how they're growing or how they're targeting clients or if they're expanding or looking at, you know, pivoting into a different area of the market. What we can use our information for, especially the Remodeler's Survey, is we're doing a lot of primary research. We're polling over, you know, 400 to 500 professional remodelers every quarter to find out about market conditions, project demand, upcoming trends, underlying drivers. So somebody that wants to understand what else is going on in the industry, what are their, you know, their peers are doing across the country. It's a really good place to go for that, especially the Remodeler's Survey, which is what I'm probably going to talk a lot about today. And I don't know of any other information source that's actually talking to remodelers or as many remodelers as frequently as we do. So, you know, when you see like a lot of that's going on with the supply chain disruptions or rising interest rates, we have pretty good data about how remodelers are actually pivoting or adjusting to the constraints or the opportunities in the industry.
Todd Miller:
Speaker:Very interesting. Well, as you talked about, that made me think. Today we have a contractor visiting us here at our offices. And, you know, this is a company that was formed just a few years ago doing primarily well, almost entirely replacement windows. And in just a few years, they have built to be about a $10 million company, which is great growth for an organization like that. But they have recently made the decision to also go into roofing and in particular, in their case, they're they're interested in having metal roofing be a significant part of that. But yeah, I did think to myself, I wonder what data, what information they had that made them choose roofing over, you know, a number of other areas they could have gone as well, so. And I do want to dig into you guy's survey because I think there's some some great information in there. Kind of curious, you know, when we think about contractors out there and it wouldn't have to be remodeling Eric, but any sort of construction contractor, is there any statistic you've read across or information you've run across recently that you think would absolutely knock their socks off if they realized it? Or is it all stuff they're going to be like, Yeah, I'm living that. I know that?
Eric Finnegan:
Speaker:Well, I know one stat that sort of blew my socks off, and I think it's, I'd be curious to hear if this knocks the socks off of anybody else. It seems like it does anytime I repeat it. But we've estimated that we need as a country, we need about 17 million homes built between 2020 and 2030 just to reach equilibrium in the housing market by the end of this decade. And that sounds like a big number, and it is. But if you chunk that down into every year, 17 million divided by ten is 1.7 million. But we're already two years into the decade and we haven't come anywhere close to 1.7 million homes delivered. It's been between 1 and 1.2 million, I believe, in the first couple of years. So if we take that 17 million and how it's already been built, we need about 1.8 million actually built every year for the next eight years to just reach equilibrium by 2030. That's mind blowing to me. We haven't had that level of construction happen in 20 years.
Todd Miller:
Speaker:Wow.
Ryan Bell:
Speaker:I agree. That's shocking.
Todd Miller:
Speaker:I'm kind of curious. So I know that in my community, and one of the things I want to touch on and great segue into it is the housing shortage. And I know in my community it really is kind of the lower end of things where we're hurting the most. Nationally, is that the case? Or is it kind of all over the place in terms of, you know, the types of homes that we need?
Eric Finnegan:
Speaker:I think it is a little bit all over the place. It's a squeeze. It is happening at the lower end for sure. If you look at the size of homes that are, the size of new homes that are built, they've just been getting bigger and bigger. So the new supply that's coming online is targeted toward people that can afford it, people that can pay and sort of like the lower end. It's hard to target that market given how expensive materials are, how long it takes to build a house. So the question is a little bit harder to answer from the data. And it's in like you said, it's it's very market specific. So there's going to be some metro areas where if you do the math, there is too many houses. Based on the population, based on migration statistics, there's too many housing units to meet the population. But there's other parts of the country where that's the complete opposite, where people are moving in and homebuilders just can't. Or apartment, developers cannot meet demand based on labor, based on material availability, based on land. So yeah, there's a lot of different factors there.
Todd Miller:
Speaker:You know, it seems like at least and we're just kind of in, small-town America where I live. And, you know, historically, what's happened is a lot of times the lower-end housing has been older homes that have been turned into rentals or maybe cobbled up into doubles or triplexes or something. And, you know, one of the things that we're seeing now is a lot of those houses are, you know, now that they're 120 years old are simply uninhabitable. So without a huge amount of investment or probably in most cases making most sense to tear them down and start over, they just can't even be lived in. And so that's really what puts the squeeze on things I know in our community, at least on that end.
Eric Finnegan:
Speaker:Yeah, we've done some estimates and we think there's, I'm blanking on the number, but it's the part of that 17 million homes needed includes all the homes that will probably be torn down or unlivable every year. And it's a big number.
Todd Miller:
Speaker:Well, certainly the last couple of years have brought a lot of challenges to the construction industry. I mean, between price increases, labor shortages, supply chain issues, everyone's been living it. And I know that it's something we can go ahead and dig into to you folks's recent U.S. Remodeler Index. But as you kind of tap into that a little bit, but any ways that you've seen contractors adapting to all of these challenges? Which fortunately seem to be getting better as reported in your report, but any unique ways you've seen folks trying to adapt to those challenges?
Eric Finnegan:
Speaker:I'm always surprised and I love learning about ways that remodelers and contractors really adapt to what's going on. So there's a, there's a lot of different ways. They tend to be fall into a few different buckets, few different categories. One is probably the most common thing I've seen is that, as soon as a customer signs on the dotted line and the contractor remodeler is going out and ordering every possible material they can, sometimes even before the customer is actually signing up and putting out a deposit. Because if there's the lead times for windows or doors is four months or six months or twelve months, in some cases they really don't have it. They really don't have any other choice. So they're getting larger deposits from their customers and ordering all the materials upfront. And what happens then is they, you know, for maybe a whole home remodel or a big complex kind of project, they'll have the materials shipped to their warehouse or their their garage and basically store all the materials for one job until they're all in place or they're all delivered. And that's when they'll start actually the tear outs. Because what they're wanting to avoid is that, you know, tearing out kitchen cabinets and countertops and waiting for appliances for four months. And they can the customer has to, you know, cook on a camp stove or something like that. It's, they want to avoid that at all costs. So what they're doing is ordering all the materials earlier, even starting projects later once they have all their materials on hand. Another thing that you had to get really good at is managing up and down the supply chain. One little quick anecdote here is that, I remember I worked actually for a concrete company one summer and I worked in the purchasing department and I was talking with homebuilder a couple of months ago and he told me that, you know, they used to have a purchasing department, but now they have a supply chain department because it used to be you could put your order in at the dealer, tell them where and when you want the product to show up and it would show up there. Now, it's a lot different. They have to, you know, they've had to actually get pretty agnostic or less brand loyal and more whatever material or whatever product is in stock, they're going to order that or they're going to purchase that. And it might require a lot more coordination with vendors and suppliers up the supply chain, but also downwind with their subcontractors and in skilled trades, where they just need to be really more careful and more coordinated in a lot more communication with with their subcontractors or their customers about what everything is going on. Basically, the whole job of being a remodeler home improvement contractor has gotten a lot more complex in the last two years. Where before it was, you know, it was one way to get the customer's specifications, design it, you order the materials, you install it and you collect the money. And now it's almost like a game of Tetris or a puzzle to put together.
Todd Miller:
Speaker:I remember this probably goes back about 18 months ago. I was visiting with a sort of a whole home remodeler, and this was right when this supply chain stuff was really starting to get ugly. And, you know, his problem was he was doing exactly what you said, ordering things ahead. And he was like, no, I don't have any space to store this stuff. And yet I don't have everything I need to go out and do jobs. And now, on the other hand, as a manufacturer, we're kind of seeing the other end of it in that our supply chain has started to improve on our raw materials. So the timeliness of our ability to ship has started to get back to a more normal level. And now our customers are saying, Oh, wait, I'm not ready for that yet, which is fine. But, you know, you're right. It's just really changed how we all have to think about our businesses and think, and we're thinking about things that we just took for granted five years ago or whatever.
Eric Finnegan:
Speaker:Yeah, it's something we track, we track a lot, especially with, we have sort of feelers and bottom-up research, primary research up and down the supply chain. We talk to the remodelers, we talk to building materials dealers. We track, you know, manufacturers, homebuilders. So we kind of see it from a really almost 10,000 foot view. And it makes my job really interesting because I get to research and do a forecasting and analysis. It also makes it really hard because it's almost like as soon as you write a forecast down, something changes and it's wrong. So I think one thing I've been humbled by consistently is how the range of possible outcomes is much bigger now than it was two years ago or three years ago. So we have to kind of like plan around that and really acknowledge that complexity or that range of uncertainty.
Todd Miller:
Speaker:Sure. Well, let's dig in to the Remodeler Index you folks just published in early August. And I think this is, as I recall, 46 pages. Great information in here. Now, this is something you folks do on a regular basis. But right now, you've made this particular report available free of charge to anybody, is that correct?
Eric Finnegan:
Speaker:Yeah, that's correct. Our clients are in the building product manufacturers space or private equity, really, companies that are selling to the remodelers. So they find this research incredibly valuable. So they pay us a lot of money for it, right? One thing we're doing this quarter is opening this up to anyone who wants to check it out as a way to just get the word out and generate some awareness about what we're doing and to see if there's other people out there that we could be serving. So it's a bit of a of a one-time invitation. I would encourage anybody who wants to know what's going on in the remodeler space, too, to check it out. And I can give you a website if that would be.
Todd Miller:
Speaker:Please, yeah. What's what's the best way for folks to get that? And I'll say too, if folks want to contact me, I'll certainly give them the link and direct them to it as well.
Eric Finnegan:
Speaker:Great, I trired to set this up so it was really easy to remember. But it's, type in, tinyurl.com. All one word. Tinyurl.com/remodeler-survey. I'll say it again, tinyurl.com/remodeler-survey. There's a form there you need to fill out, name and email. And then once you hit submit, you'll be brought to the download page.
Todd Miller:
Speaker:Well, I know I downloaded it a couple of weeks ago and, and have spent quite a bit of time with and suggested a number of other people check it out as well. You know, one of the things that I recall you'd mentioned there, the report comes back was saying that increasing interest rates seems to be having an impact on folks in terms of even remodeling as well. Is that, am I recalling that correctly?
Eric Finnegan:
Speaker:Yeah, that's correct. It's something that happened. It was a big surprise to all of us who, you know, who would have thought mortgage rates would have doubled in the first seven months of the year. But that's what's happened. And what that means is you have a number of people doing cash out refinances that full equity out of the home to pay for large home improvement projects or home remodels has basically gone from $250 billion in equity, pulled out through cash out refis and this year it's going to be 1/10 that. So yeah big change in the market and we're seeing it now show up in the remodeling space. The thing with remodeling and home improvement is that the slowdown in demand that we're seeing right now does not look or feel like the slowdown in housing that we're seeing elsewhere. So if you talk to a homebuilder, they are seeing their sales down 20, 30% year over year. They're starting, housing starts are down 24% since February. And the existing home market, the resale market, that activity is way, way, way down. And what we're seeing in the remodeling space is more just the early leading indicators. That activity will slow next year because remodelers, as anyone who's listening to this right now, are busy and booked out probably through the rest of the year. So what we're seeing is the slowdown in those new leads coming in, the new calls into the office or inquiries on their website, fewer new project commitments getting signed. And from what we hear from remodelers, that's a result of people seeing their stock portfolios down 15, 20% in the year. Therefore, when cases are down by the same amount, they can't pull equity out of their home in the same way that they could last year. So, again, really early leading indicators, it doesn't mean it's a rapid reset like we're seeing in resale or new homes. But it is happening. We do expect to see that slowdown really materialize in the next six, twelve months.
Todd Miller:
Speaker:Well, I know it's interesting for us. I always think back and you alluded to it earlier, 2008, 2009 housing bubble was bursting and everything was coming to a falling off a cliff. But actually, it was kind of interesting. 2009 for us was an incredibly robust year for high-end remodeling. I don't think that was the case for lower-end stuff, but for high-end, what we found was a lot of folks who maybe had been saving money, thinking they would build new, decided to stay where they were and invest in their current home instead. So any thoughts as we see that remodeling slowed down this time? Do you think it's likely to impact smaller projects more than larger or vice versa or maybe all over the board?
Eric Finnegan:
Speaker:I think there's going to be a pocket of demand at the really large projects that are, you know, could be 200k to 400k or above of like a gut renovation. The people that are doing that kind of projects. You know, a swing in the stock market or a slowdown in housing, it's not really going to affect them too much. So is that really sort of top 5% of the market probably won't be affected. I think where it's going to show up most. It's already showed up in the small projects space. Those are, you know, below say $8500 per project. So the thing with remodeling is that we found through the data analysis and sort of the incredible amount of research that that came before even I joined the company, is that a way to predict the amount of large project remodels is what's happening to house prices? If house prices are going up, people are generally feeling good about investing in the home. So they're going to do that. They're going to take, you know, more and more projects. And we see that if house prices stall out or actually fall, then people pull back. Because as the whole there's a whole psychology shift when house prices are going up, looks like you're going up every year. And people kind of get into the kind of lulled into the thinking that house prices can't go down. So investing, you know, $50,000 into a kitchen upgrade sounds great. It's going to force appreciation into the home. It's going to be repaid back if I ever sell. But then when house prices start to slow or fall, it's a real pivot. It's a real sort of wakeup call. So I think we're going to see over the next year, maybe two years, is that a lot of the remodeling space is going to is going to hunker down or slow or pause. But after the next year or two, I think between now and 2030 is going to be an incredible decade for remodeling demand. And it's part of what you talked about, Todd, where people are staying in their home longer. So another mind blowing statistic is that 99% of mortgage borrowers have a rate that's below the going going rate today. Three quarters of those mortgage borrowers have a rate below 4%. So if you think about that, that's a huge incentive to just stay put, stay where you are, don't buy a new house because you don't have to get the mortgage rates basically double or would be double what you what you're currently paying. So we're seeing a huge, huge I guess the wave is people staying in their house and instead of trading up, they are trading up in place. They're going to stay in their home another ten or fifteen years and they're going to upgrade everything. And it might take them, you know, two or three years or five years to do that. But they are really opting to invest in their current home rather than go elsewhere.
Todd Miller:
Speaker:Wow. I never would have thought of that Eric. That's a very, very good point, though, in terms of the interest rates, the impact that has. Never really thought about that. I know in my own neighborhood, we we have one of the more modest homes in our neighborhood, but we have seen two houses in the last couple of months break the half million dollar mark in terms of what they're selling for one of them. One of them is still for sale. But, you know, like you said, that also impacts me in how I think about my own home when I start to see values like that. But on the other hand, if there's a slide downward, that's going to have an impact as well. And you're absolutely right, why would I trade in my 4% mortgage for a 5 1/2 or 6% mortgage at this point or more?
Ryan Bell:
Speaker:I get a text message or two just about every day from a realtor trying to buy my house. There's high demand in the neighborhood that we're in. And my answer, you know, make me an offer. Of course they won't. They're like, What would you sell your house for? And I'm always like, $1 million. And then, you know, I'm like, where, where would you expect me to go? Like, I'm in a great position in my current home, and where am I going to find a house that will fit my family that's affordable right now? Like it doesn't make sense.
Todd Miller:
Speaker:Yeah, good point. Well, kind of switching gears a tiny bit. I know that, Eric, in your work, you also look at building materials, building products. Just kind of curious, are there any trends you're seeing out there in building materials that you think are likely to have a heavy influence over the next five, ten, fifteen years, whatever?
Eric Finnegan:
Speaker:My big fingers-crossed trend that I hope to see happen is a higher productivity in the space. So prefab construction, I'm not an expert in that. There's, we have Chris Beard on our team runs a structural building components survey where he talks to roof truss manufacturers. He really has a good read on that space. I hope that takes off and houses get easier and quicker to build. One thing I do, I am tracking that I I'm pretty optimistic about, I'd say is there was a section of the the recent Inflation Reduction Act tax credit for homeowners that invest in energy-efficient home improvements. And what I've learned so far is that there was already a tax credit for home energy-efficient home improvements on the books already. But I had never heard of it. And it was, I don't think was ever a really big factor. The reason why is because it was a $500 tax savings maximum over your whole lifetime. That was the way it was, and it was actually $200 maximum if you were talking about windows. So basically nothing. In a $40,000 window replacement job, $200 savings is nothing. Now, that savings has been up to $1200 and it's not a lifetime limit. That's just an annual limit. You can get the $1200 tax savings every year by investing in energy-efficient home improvements. So things like windows, doors, water heaters, furnaces, air conditioning, certain kinds of stoves and boilers, electric panels. You can do home energy audits. Those are in now incentivized in a pretty big way by the federal government. That takes effect next year in 2023. It's not happening, the effect isn't showing up just yet. But if you think about that homeowner that wants to turn their home into an energy-efficient unit, they've basically been written a check by the government for $1200 a year to invest in their home. And it's hard for me to really predict what effect that's going to have in terms of total dollar value. But this is a pretty big shift, I think. And it's it's also coupled with, you know, there's going to be, I think, higher energy prices over a long period of time. We're seeing what's happening in Europe right now, and it's just mind boggling where energy prices for homes of businesses are going up 10x because of what's happening over there. And I don't think we ever get down to oil at $30 a barrel ever again. If we do, I'd be concerned about what conditions are making that possible. Are we in a depression? Is something else going on there? So I'm really optimistic about this, that a lot of home improvements are now incentivized to have everything become more energy-efficient and more environmentally conscious and that type of thing.
Todd Miller:
Speaker:Well, you can bet, yes. That upgrade of what used to be the 25C tax credit really caught our eyes as well. And you're right, I mean, our 1200 dollars per year now is ideal for someone who might be replacing all their windows and doing it over several years. The one bummer in all of that is reflective energy-efficient metal roofing used to be part of the 25C credit and now it's been pulled out. Not entirely sure why that happened. I suspect it's because Energy Star actually sunsetted their program for reflective metal roofing in June of 2022, and so that kind of took away the criteria for determining what is an energy-efficient roof. And so I suspect that's the reason that it did not get continued. But yeah, I'm already talking behind the scenes saying what if we could lobby a little bit for this because there's still a good story there to be told, especially with metal roofing and the fact the vast majority of it is made from American-made metals. So there's a lot there to be said for for the economy as well. So, Eric, we think that a lot of our audience members are younger folks in the construction and design industry. Any particular advice you'd have for them as they start out or continue their careers?
Eric Finnegan:
Speaker:Yeah, I would say, and this is through my own experience of kind of getting off the path a bit, but I would say starting with a why, why get into the business, why work at all? Why start a business? Why serve clients? What's driving that? Is it that you want to build things? Is it because you want to support a family? Is it because you want a lot of money? Is it because you want to fund other parts of your life? What is that? And let that sort of inform what kind of work you do, how you do it, who you work with. I think matching up your own personal sort of mission with what you're doing and making sure those those are as close to overlapping as possible. Because I think early on there's sort of a message that young people should work really, really hard. I tend to agree with that, actually, because it's the time of life where it's much easier to recover after a hard day as a 24 year old versus, you know, a 50 year old. So working hard, I think, is a really good thing. And I would say just pay attention to making sure you're always sort of aligned with a bigger mission, whatever that is.
Todd Miller:
Speaker:I really like that. And we've asked that question before. And yeah, your answer nails it extremely well. And a lot of times folks say, Well, I'll do the thing that you seem to enjoy the most and you're going to keep energized by the most. And there's something to be said, much to be said for that. But I love the way you put it as well, good stuff. Anything that you can think of that builders and remodelers can do to really make themselves stand out from their competition?
Eric Finnegan:
Speaker:I would say this is going back to real basics. I remember there was a book I read by a sort of a marketing author,Jay Abraham. The book is called Getting Everything You Can Out of Everything You Have, I think. But he talks about, he has a whole chapter in there about what a client relationship really means and that it's so simple, but so profound. And it sort of changed how I view business where he sort of differentiates between customers and clients. Customers are transactional. They come into your store, they order from you, and they get the product or their service and then they on their way. A client relationship is more partnership. It's more relational-based rather than transactional. And my sense is to use that as the sort of guiding principle or orienting principle is just by doing that, you're going to set yourself apart from tons of other people. So it would, really tangibly that's really kind of up in the clouds. Really tangibly, I think that looks like knowing what you do better than anyone else, finding the clients that need that thing, whatever that is, and serving those clients to the best of your ability. Because those people are going to be, your clients you serve are going to be your sort of 24/7 sales force after you've finished the job. And it's sort of a selfish reason to serve clients really selflessly like that. But I think the referral relationship with a client, past client relationship, that's something that can never be taken away. It's not something that a Google algorithm can shift. It's not something that you're going to have to pay per click on Facebook or pay for to get ads in some local trade magazine. I find, and before I joined John Burns, I had my own business for a while, so I lived this really almost religiously. That the clients are going to be the way that you stand out from the competition, the way you treat clients. So I would just focus on that.
Todd Miller:
Speaker:I love that. And you know, I know one of the things I think a lot about is the customer experience. What does their experience look like? And no doubt about it, when you really focus on that, it changes your business. And I think, you know, even as a business owner, you see yourself fulfilling, giving that desired customer experience. And, you know, that's very rewarding also rather than just a very transactional customer number 47 type approach to things. Good stuff.
Eric Finnegan:
Speaker:Totally agree.
Todd Miller:
Speaker:Well, we're really close to wrapping up the business end of things here, and been a real pleasure and privilege to talk and a lot of fun. Is there anything we haven't covered today that you'd like to share with our audience? And if you would go go ahead and give us the URL again to download the survey results.
Eric Finnegan:
Speaker:Sure. So it's the Remodeler's Survey. It's called the US Remodeler Index. It's done in partnership with Qualified Remodeler, which is a magazine. Long running magazine in the space. So it's tinyurl.com/remodeler-survey. That's the way to download that. As far as something we haven't talked about yet, I would say that the importance of thinking long term as a business owner, something we try to to promote for our clients is one of the reason we deliver data and forecasts and analysis is I think it's important to understand what's happening today in the market, but it's really in service of planning for tomorrow. Okay, so I think the way to, one way to test this might be going back to your question before on how to stand out from the competition. But I think the business that can think the longest term and invest in the longest horizon is going to be better off in ten years than the company that is is just day-to-day. Right, they're just kind of working today to get through today and then wake up tomorrow and do the same thing over again. And there's something about looking at the market as a whole and the data from the market analysis and what other remodelers are doing that I think can promote and really encourage that kind of thinking. So that's one pitch to a remodeler that, you might not think about industry data or industry statistics or wanting to know what a roofing company across the country is doing. But I would really encourage that, even just to try it out.
Todd Miller:
Speaker:That's good stuff. So, you know, what I hear a lot from you is, you know, think about where you're going, where you want to go, why you want to get there, why you want to go there, and then kind of build your business around that and figure out what it's going to take. Good stuff. Well, before we close out, this has been really good. Before we close out, though, I have to ask you if you're willing to participate in something we call our rapid fire questions. So these are seven questions. They may be a little silly, some maybe a little more serious. All you got to do is give a quick, short answer and our audience needs to understand, if Eric agrees to this, he has no idea what we're about to ask him. So what is it? You up to the challenge of rapid-fire?
Eric Finnegan:
Speaker:You know, I feel my heart beating a little bit faster. One the benefits of being a researcher is I get to sit and think about questions like a lot for a while. So, yeah, rapid-fire makes me a little nervous, but I'm in.
Todd Miller:
Speaker:Cool. Good deal. Well, I'm going to let Ryan ask the first question and then we'll alternate.
Ryan Bell:
Speaker:Alright, here we go. Thinking back to when you were a first grader, did you know or what did you think you wanted to be when you grew up?
Eric Finnegan:
Speaker:Oh, first grade, I remember that was that was the early nineties. And I remember I remained glued to the TV watching the the army or whatever, whoever it was, and the Iraq invasion, the first Iraq invasion of Kuwait happened right around then. I saw video clips and news clips of soldiers and I was fascinated. And the sort the structures they would actually build, like the bunkers, that was fascinating. I would draw those out like hours a day. So I think if I could answer go back to then I would be a soldier, or I would be in the military designing protective bunkers in the desert.
Ryan Bell:
Speaker:Very cool.
Todd Miller:
Speaker:Good stuff. Very noble. Anyone alive today who you would love to trade places with just for a day?
Eric Finnegan:
Speaker:Ooh, the first. I don't know why this is happening. I can probably think of why, but the first one is coming up is Bruce Springsteen.
Todd Miller:
Speaker:Oh, cool.
Eric Finnegan:
Speaker:So he can play, you know, play a concert. He's you know, he's up there in age.
Todd Miller:
Speaker:Yeah.
Eric Finnegan:
Speaker:But he can play harder and longer than people one third of his age. And he seems to have so much fun doing it. There's not a lot of pretense. He's just seems like he's having fun connecting with the audience and he seems like he's having as much fun as they are. I would love to experience that.
Todd Miller:
Speaker:That is a great answer. Good one.
Ryan Bell:
Speaker:This question's a little out there. Would you prefer? Well, maybe they all are, but would you prefer to eat only pickles for a day or drink only soy sauce?
Eric Finnegan:
Speaker:Oh, I guess it depends what kind of pickles. No, no, it doesn't depend on what kind of pickles. I don't like soy sauce. Pickle,. I'm going to go with pickles.
Ryan Bell:
Speaker:Yeah, I think that's easily the choice I would make too.
Eric Finnegan:
Speaker:Yeah.
Todd Miller:
Speaker:Well, you told us earlier that one of your first jobs and favorite jobs was landscaping. What would you say is the worst job you've ever had or the job you had that you enjoyed the least?
Eric Finnegan:
Speaker:The job I enjoyed the least was, I started working at a grocery store the summer between... Worked at a grocery store at night, the summer between high school and college. And I just worked in the grocery store and I worked in the meat department and so I would stock the shelves and get rid of or stock the sort of the cooler shelves and then pull out, you know, meat that expired, that wasn't good anymore. That was the worst job. I love meat. I love eating meat, burgers, steaks, anything. I couldn't eat meat after having that job for about six months. Ehh, it was awful.
Todd Miller:
Speaker:Oh, I can well imagine just the smell. Just thinking about it.
Eric Finnegan:
Speaker:Yeah.
Todd Miller:
Speaker:Being with that for several hours, yeah.
Ryan Bell:
Speaker:Yeah.
Todd Miller:
Speaker:I'm getting the heebie jeebies.
Eric Finnegan:
Speaker:If I ever get there.
Ryan Bell:
Speaker:Alright. How do you feel about clowns?
Eric Finnegan:
Speaker:I get curious about clowns. Like what kind of a being would be a clown? Do they work when they're not in their clown suit? Like, what is that first hour like after they take off the clown suit and after they take off the makeup? What is the hour before that they put it on? Are they excited to put it on, or are they kind of dreading it? Are they relieved when they take it off, or are they kind of like, I had a good time as a clown today, I guess. Yeah, that's kind of where I go, that's where I think.
Todd Miller:
Speaker:You have thought much more about clowns than I have. I love it, though.
Ryan Bell:
Speaker:That, that's how I am going to think about clowns from now on.
Todd Miller:
Speaker:Yeah, I think I will too. Think of the person in your life on a regular basis who you have known the longest other than a relative. How many years has it been?
Eric Finnegan:
Speaker:My best friend, Paul, Paul Swimm. He, I've known him for probably 30 years.
Todd Miller:
Speaker:That's cool.
Eric Finnegan:
Speaker:We, I first got to know him, but we played on our first Little League baseball team together. We traveled the country together when we were 22. He runs a business in upstate New York in landscaping, which is. We both had our first day on our first job landscaping together, also. He's growing a business that's super successful. He's the best hardscaper in Syracuse, New York. I'm gonna plug his business if I could, swimmlandscape.com. He's my best friend, I've learned so much from him, had so much fun.
Todd Miller:
Speaker:That's fun to think about, I think. I'm blessed to have a coworker here who I met when we were 12 years old and we now work together and we've done some of those road trips for business and stuff.
Eric Finnegan:
Speaker:Oh, that's great.
Todd Miller:
Speaker:Yeah, that's pretty cool stuff.
Ryan Bell:
Speaker:How do you spell his last name? Swim?
Eric Finnegan:
Speaker:S-W-I-M-M. It might be swimmlandscaping.com.
Ryan Bell:
Speaker:Swimm, yes I just pulled it up. I was going to say that's a cool last name.
Eric Finnegan:
Speaker:Yeah.
Ryan Bell:
Speaker:We'll, we'll put a link to it in the show notes.
Eric Finnegan:
Speaker:Awesome.
Ryan Bell:
Speaker:Final question, what's your bucket list vacation?
Eric Finnegan:
Speaker:So I've always, okay, so my bucket list vacation is to spend a month in Australia. My wife is, is from Australia, she has a bunch of family back there. So we're going to make that happen actually in the next year or so. I just need to figure out a way to to get out of the country for a month and not drop everything.
Todd Miller:
Speaker:Very cool. Well, Eric, again, this has been a pleasure, a lot of fun and very informative as well. And I certainly hope that folks want to reach out and learn more and also download that report. But if folks want to get in contact directly with you, what's their best way to do that?
Eric Finnegan:
Speaker:So if they're on Twitter, follow me on Twitter, it's my username is just my first and last name, Eric Finnegan. I like to share some interesting charts and data on housing and remodeling, building materials, you know, a few times a week. Also LinkedIn, you can find me on LinkedIn or you can email me at efinnigan@realestateconsulting.com.
Todd Miller:
Speaker:Very cool. I will connect with you on Twitter. I had not seen your Twitter accounts and want to check that out. Well, thank you again for joining us, it's been a real pleasure. Greatly, greatly enjoyed it. Oh, I do have one more thing to mention. Behind the scenes, Ethan reminded me of this, our challenge words. Eric, I'm not sure you got yours worked in, did you?
Eric Finnegan:
Speaker:Oh no.
Todd Miller:
Speaker:It's okay.
Eric Finnegan:
Speaker:Bummer.
Todd Miller:
Speaker:You get rolling and you forget. So Ryan got his in right off the bat. Ryan, I gave you?
Ryan Bell:
Speaker:Valentine. I asked it in a little in a little bit of a weird way, but it would have been better if I said, Did your valentine go with you?
Todd Miller:
Speaker:But well, yeah. It sounded like.
Ryan Bell:
Speaker:I wasn't planning on slipping it in that quick. It just came to me.
Todd Miller:
Speaker:It sounded like my valentine was someone other than my wife. So I was gonna get myself in trouble there.
Ryan Bell:
Speaker:Sorry about that.
Todd Miller:
Speaker:And I had the word snoring, which I think worked in. Eric, your word was? You can say it now.
Eric Finnegan:
Speaker:Motorcycle.
Todd Miller:
Speaker:I kept wanting to say it for you. I kept wanting to say was that was that six-month road trip on a motorcycle by any chance?
Eric Finnegan:
Speaker:I had it written down. I put it right next to my my monitor here. I really let you down. I'm sorry about that.
Eric Finnegan:
Speaker:Todd Miller: It's quite all right. It was a good time. Well, I want to thank our audience for tuning into this episode of Construction Disruption. Our spotlighted guest has been Eric Finnegan of John Burns Real Estate Consulting. Please, watch for future episodes of our podcast, we have great guests on tap in the future as well. Don't forget to leave a review on Apple Podcasts or YouTube. Until the next time, change the world for someone, make them smile, encourage them. Two very simple but yet powerful things we can do to change the world. God bless, take care. This is Isaiah Industries signing off until the next episode of Construction Disruption.
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