Contractor Update

It's been a wild, bumpy week in the financial world. Does the doom and gloom in the news affect you and your small business? Under normal circumstances, no. But these are not normal times. Two things are going to affect you and your business through the rest of this year.

First, your potential clients are watching the news and are worried about their stocks, 401K accounts, and insurance policies. This will sharply affect consumer confidence through the rest of the year. If people are worried about their money, not only will they not risk a high-end remodeling project but they may also skip on needed repairs and regular maintenance.

Second, as banks and investment firms circle the wagons, there's going to be an even greater tightening of credit. They'll take even fewer chances in the coming months and so it will be harder for folks on Main Street to get to the money they need to hire you.

Those two factors could severely impact every contractor and small business owner in the construction and remodeling industry through the rest of 2008.

We haven't had this sort of pressure put on the financial industry since the Great Depression so we're moving into uncharted territory. Fear of the unknown could prove harder for all service professionals to close those deals.

Keep an eye on your ConstructionDeal.com Contractor Update page for more updates in the coming weeks.

Labels: Construction News, Economy

Here's an interesting article from Philly.com: "The housing slowdown and mortgage crisis have finally begun cutting into the remodeling market."

"Remodeling activity slowed slightly in the second quarter, according to the National Association of Home Builders' Remodeling Market Index, which measures remodelers' perception of current demand and future activity. An index of 50 or above indicates that most remodelers view market conditions as improving."

"In the Northeastern United States, the home-builders association reported, things were a bit better in April, May and June, with the remodeling index climbing to 49.5 from 43.4 in the first quarter."

"'While we have experienced some weakening in the remodeling market, activity has remained relatively steady,' said Mike Nagel, NAHB Remodelers chairman. 'We may have seen a decline in the number of major remodeling projects, however, the market has been buoyed by an increase in the number of homeowners requesting smaller-scale projects and home alterations.'"

"These days, with interest rates rising and credit tightening, fewer homeowners are tapping into equity. According to Freddie Mac, the amount of home equity cashed out through refinancing in the second quarter totaled $76.7 billion, a drop of $24.5 billion compared with the same quarter last year."

"'Both the tightening of underwriting standards and slackening house-price appreciation are possible contributing factors to the decline,' said Frank Nothaft, Freddie Mac's chief economist."

"Fixed 30-year interest rates are hovering around 6.60 percent. While that's just a few basis points higher than in August 2006, it's more that 1.5 percentage points above the rates available during the refinancing frenzy of 2001-2005."

"But there is another, more troubling issue here: American families cashed out $1.2 trillion of home equity between 2001 and 2006, which could leave them financially ill-prepared for the future, said Tim Rusch of the nonprofit public-policy organization Demos."

"'The impact of this trend is manifold: Families no longer have an asset to turn to in times of emergency, or to cover education, or for support in retirement - a foreboding shift in household security as millions of baby boomers near retirement age,' he said."

"More families are being pushed to the edge of bankruptcy as their APRs (annual percentage rates) reset and they are unable to make payments on their homes or keep up with other bills, Rusch said. And in locations where the market is flooded with vacant foreclosure properties and sale prices are dropping, many who refinanced can actually find themselves "upside down" in a home."

"'In other words, they have borrowed the entire value and owe more on it than it is actually worth,' he said."

"Not surprisingly, the remodeling market is following the downswing in the overall housing market, said the home-builders association's chief economist, David Seiders. 'We expect some further erosion in the second half of this year and in 2008, followed by a gradual recovery in 2009 and beyond.'"

Woodbury remodeler Jay Cipriani began 2007 with "an aggressive goal" of surpassing the $6.5 million his company made last year by $1 million.

"We had a meeting early [August] to tail back this year's budget to $6.8 million. It's a more cautious market," said Cipriani, whose firm does about 100 large and small jobs every year.

Though remodelers are feeling the pinch, home centers appear to be as full of shoppers as ever. Yet representatives for those store chains were unwilling to comment for this article.

"We are in a quiet period in advance of earnings release . . . so I am not able to talk about sales trends (including shopping habits)," Chris Ahearn, vice president of public relations for Lowe's, said earlier this month.

Thus far, the downturn in the housing market hasn't hurt the profit margins of major appliance manufacturers. Whirlpool, GE and LG Electronics all reported record sales and profits in the second quarter.

But Whirlpool's bottom line benefited from stronger sales abroad. In North America, the company's reported sales were down 6 percent, to $3 billion, because of lower appliance shipments and softer demand.

Though industry-wide shipments of washers and other major appliances fell 1 percent in North America in the second quarter and 5 percent in the first half of 2007, Whirlpool noted that shipments in the region began to improve in the period, after months of declines. The company still expects U.S. industry shipments to fall 2 percent to 3 percent this year.

Figures from GE and LG included divisions other than appliances, as well as global sales.

From a remodeling-to-sell point of view, owners' attitudes toward having work done before their houses go on the market have changed. Mike McCann, a Prudential Fox & Roach associate broker in Center City, said even sellers planning to list their houses six months to two years down the road are asking his advice.

"It's definitely a change from a couple of years ago, when you couldn't convince them to do anything," said McCann. He mentioned refinishing or installing new flooring, updating appliances, and painting as three upgrades he's seeing a lot of currently.

"We're not seeing people refinishing basements or putting in kitchens and bathrooms, which is something that a seller shouldn't do in any real estate climate," McCann said. "It's cosmetics, pure and simple."

So, with sellers making cautious improvements before they list their houses and anecdotal evidence from the home centers indicating that more homeowners are doing their own work, where does this leave the remodeler?

"It is a more difficult market," said Cipriani. "Our clients are still spending $50,000 on a bathroom or a kitchen, but most are not willing to spend a couple of hundred thousand on an addition."

On at least three occasions recently, Cipriani said, his estimators have reported that "customers have been delaying the start of jobs because they are looking for money."

He has a sense, he said, that lenders are tightening underwriting standards for refinancing and personal loans, and that the easy money that was around even nine months ago just isn't there anymore.

"Right now, we're hoping for the same amount of business as last year, or a little bettter," Cipriani said. "We just can't be as aggressive in our estimates as we were at the beginning of the year."

Labels: Construction News

At ConstructionDeal.com, we want to keep our contractors up to date on all the latest news and information that affects their companies. Here are a few excerpts of late-breaking stories on the slowing housing market:

From Reuters :"U.S. house prices may fall further as credit availability tightens, according to a new study from the Cleveland Federal Reserve."

"'House prices may still fall in the future,' wrote the researchers. 'Any change in the ability to purchase a home, such as from innovations in the lending environment, can have a large impact on the level and volatility of housing prices.'"

"The study went on to forecast that the boom-bust cycle of lending could crimp the ability of households with a weaker credit profile to borrow."

From CNN Money: "Home Depot's CEO Frank Blake said Wednesday that the softness in the housing market and the subprime mortgage squeeze will probably carry through much of 2008."

"'In the beginning of this year, we had hoped to see the start of some bottoming in the housing market in the back-half of 2007. We don't think this will happen,' Blake told an analysts gathering."

"He added that 2007 'will continue to be a tough year.' More importantly, he said 'much of 2008 will face into the same headwinds.'"

"'There's a lot of speculative activity in the markets. And the subprime issue is putting additional pressure on consumers. We will see this play out over the next few quarters,' Blake said. On a regional basis, Blake said Florida and California were two markets that had suffered the most dramatic slowdown in terms of Home Depot’s business."

From the Daily Herald: "Because home sales and moves stimulate purchases of appliances, electronics and furniture, the giant chains that catered to house flippers and renovators have reported recession like results."

"Americans who were living high by taking out home-equity loans during the boom have watched their equity drop and are now faint of heart when it comes to big-ticket discretionary purchases. The nation's biggest retailing sector - automobiles - is likewise feeling the effects."

"John Crane, general sales manager at Ron Smith Buick Pontiac GMC Jeep in Merced, Calif., has seen a tremendous slowdown in the past six to eight months. 'People don't have the money to look at cars,' he says. 'They're having a hard time paying house payments. Now their second mortgages and 1 percent loans are coming up.'"

Labels: Construction News

An unexpected new twist could seriously affect the remodeling, building, and home repair industry. As homebuilders finish off current projects, new home construction will continue to plummet as the glut of existing properties will take time to evaporate. And, as home prices drop over the course of this year and next, available home equity will also dry up. With less equity, homeowners will not be as willing to spend on renovation projects. Another expected trend has been workers and companies transitioning out of new home construction and into remodeling and home repair.

All of those factors were predicted and are coming true. However, the unexpected new twist is what really has economists worried. Over the course of the past two months, the credit industry has severely tightened their lending policies. Because of all the sub-prime loans that have and will continue to go bad, lending institutions have become afraid to approve new loans. Zero-down mortgage products have disappeared. Even people with good credit and down payments can't get a home loan. Their fear goes beyond mortgages, too. People with great credit scores and equity in their homes are being turned down for renovation loans. Others may be able to get a loan but the interest rates are so high that many are walking away.

With credit becoming more and more unavailable, it will continue to drag down the overall housing market. Not only are potential buyers waiting for prices to come down out now they may not even be eligible to get an affordable mortgage when prices do drop. This can only hurt the overall economy. Experts are suggesting the Federal Reserve may drop rates again at their next session in September, but it may be too little too late. If the housing market continues to affect jobs outside of real estate and lending, it could mean a very long and very tough 2008. A recession could be just around the corner.

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MORE CONSTRUCTION AND ECONOMIC NEWS:
From the AP: "WASHINGTON -- Construction activity plunged in July by the biggest amount in six months as spending on homes fell for a record 17th straight month."

"The Commerce Department reported Tuesday that construction spending dropped 0.4 percent in July, compared with June, the weakest showing since a 0.6 percent fall in January."

From Bloomberg: "Homebuilders are scaling back to try to trim the glut of unsold residential properties even as companies are still adding offices and factories. The downturn may steepen as lenders make it tougher and more expensive to get financing following the sell-off in credit markets in August."

Also from Bloomberg: "So far, the Fed has refrained from reducing its benchmark interest rate, using other tools to ease tightening credit conditions."

"Federal Reserve Chairman Bernanke and his team lowered the discount rate, for direct loans to banks, by half a percentage point on Aug. 17. The main target rate remains at 5.25 percent."

"Officials acknowledged in their statement that risks to economic growth had 'increased appreciably.'' They next meet Sept. 18, where investors anticipate they will lower rates at least a quarter point."

"The Fed chief said earlier in his opening speech to the conference that the Fed 'will act as needed' should a sustained tightening in credit threaten the economy."

Labels: Construction Industry, Construction News, Construction Trends, Small Business Advice

From Financial Sense Online Market WrapUp: "The markets were down sharply yesterday on negative news from big retailers indicating the housing spillover is getting worse, not better. Yesterday Home Depot lowered its 2007 earnings expectations, announcing earnings per share for the year would drop 15%-18%, greater than the 15% drop previously announced in May. "

"'We look at the overall market and there's still a correction that lies ahead of us,' Chief Executive Frank Blake told analysts. 'But we're pretty far ahead in the correction process.'"

"Shedding light on how bad things are for Home Depot, same-store sales are expected to tumble in the mid-single-digit range, marking the second time in Home Depot’s history that it has seen negative same-store sales. Total retail sales are expected to slide 1%-2% for the year, greater than the 0%-1% originally estimated."

"Also weighing the markets down yesterday was Sears announcement that second-quarter earnings will be in the $1.06 to $1.32 a share range, roughly half Wall Street’s call of $2.12 a share. Sears reported that same-store sales fell 4% at U.S. Sears stores, with declines witnessed across most categories and the greatest weakness seen in home appliance sales. "

"Durable good sales, such as home appliances, have been steadily loosing ground to nondurable goods sales, such as food and beverage, as the economy slows, and the poor home appliance sales at Sears comes as no surprise and does not look to reverse course any time soon."

Labels: Construction Industry, Construction News

From Florida Today: "The housing market in Brevard County is doing better than some markets in Florida, and doing worse than others, said Franck Kaiser, chief executive officer of the Home Builders & Contractors Association of Brevard."

'Because of the housing slowdown, small homebuilders like in Brevard County like Bruce Pearce have been forced to focus on home repair and remodeling jobs."

"Pearce, owner of Talbott Construction Design Inc. in West Melbourne, said he may get out of homebuilding if business does not pick up because it is hard to compete with large corporate builders in a slow market."

"Kaiser said homebuilders generally have dropped prices for new homes, including taking losses on some homes to clear out their inventory."

The Herald Tribune reports from Florida. "If you need evidence of how the slumping housing market is impacting the local economy, look no further than Port Manatee. Shipments of lumber, plywood and fencing materials that exploded during the housing boom have dropped off significantly during the bust."

"'The market crashed and no one needed plywood,' said Capt. Rasmus Okland, terminal manager for Port Manatee’s largest forestry product importer. 'Prices have come down and stayed down, and consumption remains low.'"

Labels: Construction Industry, Construction News

"The Home Depot Inc., the world's largest home improvement store chain, cited erratic weather and continued weakness in the housing market as it reported Tuesday a 29.5 percent drop in first-quarter profit."

"'While we expected a tough quarter, this was worse than we expected,' CEO Frank Blake said in a conference call with analysts. He said the housing market continues to be a challenge, and erratic weather conditions across the United States negatively affected the company's spring selling season."

"Blake said Home Depot is not expecting any 'near-term market improvement.'"

The Canadian Press. "Forestry company Tembec Inc says it will shut down its Kirkland Lake, Ont. engineered wood products mill for at least two months to cut inventories because of the slumping U.S. housing sector."

"'Demand for lumber is down sharply, driven primarily by the dramatic decline in the level of housing starts in the United States,' said Dennis Rounsville, president of Tembec's forest products group. 'This decline in demand has resulted in both lower prices for lumber and reduced operating rates in sawmills across Eastern Canada.'"

Labels: Construction Industry, Construction News

Many of the members in our network have been reporting a big drop in local remodeling, repair and building jobs in their area. At Construction Deal.com, we receive and review many economic reports on the industry and we want to provide you with an updated outlook for the rest of 2007.

The Good News
Overall, the economy is moving along nicely. The job market is steady. Interest rates are holding. The stock market continues to expand. Excluding energy prices, inflation is not currently a problem. And the Federal Reserve appears to have no intention of raising interest rates any time soon.

Many of our contractors are saying that people are starting to plan new building and remodeling projects again. Fears of a bursting housing bubble and lower housing prices kept many in the dark but they are coming out to test the waters again.

The Bad News
Recent reports show jobless claims rising. Salary growth is stagnant. Job growth fell to its lowest level in 2 years. Consumer spending is finally starting to cool. Most of the job losses have come from construction jobs and retail. And oil prices are still very high.

What Does It Mean?

• Consumer confidence and the nation's housing market could cause problems. Homeowners and business owners may not be willing to take on expensive remodeling or repair projects if they fear a dip in the economy.
• Housing prices have not crashed but potential buyers want and will soon demand that prices come down.
  
• If home prices drop, people will have less equity. Less equity means less money to spend on improvement projects. They can't borrow against equity that has dried up. They may be worried it will cause a chain reaction bringing down the rest of the economy.
• If mortgage and borrowing rates do not drop, fewer people will be buying new homes and may hesitate to remodel current homes. Many economists are reporting that our new Fed chairman is making a mistake by not cutting interest rates. A minority are saying that his inaction on rate cuts may send up into a recession later this year.
  
• One thing that will not help the housing market: the disappearance of sub prime loans. These days, mortgage companies also fear 100% financing on house purchases. With fewer people able to buy a house, the supply of houses will continue to stay high.
  
• Foreclosure rates are skyrocketing. Some cities and counties have foreclosure rates that are up 3o% to 50% over previous years. Foreclosures increase the amount of available housing and the reports of these foreclosures keep consumer confidence bogged down.
  

For 2007, it could be a slow year for all sectors of the construction industry. It might mean waiting for confidence to return, which will happen if housing prices only drop a small amount throughout the country. We'll try to keep you updated as new reports come in.

If you are a member of the Construction Deal.com network, we'll continue to bring you as many jobs as we can to help grow your business. We have added 40 new residential categories and over 80 commercial construction, remodeling, and repair categories. Advertising and marketing has begun in earnest on our new commercial categories so you should see an increase in available jobs.

If you're not a member yet - consider registering for free. You can review local commercial and residential job leads in your area. If you see a good history of past and present opportunities, feel free to become a member! If not, continue to monitor your account with us for as long as you would like until more new jobs come up in your area. Give us a call if you have any questions at 866-663-4711!

Labels: Construction News, Construction Trends

The LA Times reports from California. "John Rockey has been hanging drywall for 35 years, and he's seen it all in the boom-again, bust-again Antelope Valley housing market. By the time a new building spree peaked in 2005, Rockey's payroll had again grown to 200. Now, his Lancaster-based Progression Drywall Corp. is down to 50 employees, and he's got a serious case of deja vu."

"'This is looking like 1990 all over again,' he said."

"'A lot of people are panicking,' said Jaimes Gumaro, a North Hollywood real estate agent who has a listing in a Palmdale neighborhood dotted with homes for sale. 'They were expecting to have all this equity, and then it suddenly stopped. Now, they just want to get their money out of it. They're saying, 'I'm outta here.'"

"Foreclosure sales in Lancaster and Palmdale rose to nearly 200 between Dec. 1 and Feb. 28, an eightfold increase in a year. Notices of default more than doubled over the same period a year earlier, totaling more than 1,000 from December through February."

"'Now, we have all these folks who can't afford their homes and their loans are adjusting, literally by the thousands,' said Peter Terracciano, who founded his Palmdale brokerage in 1990, as the housing boom began to go bust."

"Rockey gets most of his work from large builders. 'Every customer has a different story every day,' he said, 'and they're not good stories.'"

"He recently learned that the builder of 300 new houses he'd been lined up to drywall in Rancho Cucamonga abruptly halted the project, costing Rockey $4 million in work. 'We're getting killed,' he said."

Labels: construction jobs, Construction News

Industry News from ContractorMag.com: "Nonresidential building continues to outperform the residential segment, and construction industry job and wage figures reflect that trend, said Ken Simonson, chief economist for the Associated General Contractors."

"He said he was looking on the bright side when commenting on a Jan. 3 report from the U.S. Census Bureau that shows the value of construction put in place in November 2006 totaled $1.184 trillion at a seasonally adjusted annual rate, down 0.2% from the upwardly revised October total. "

"'I must point out there was lots of good news hidden in today's seemingly gloomy construction spending report,' Simonson said. 'Nonresidential spending showed a strong 1.2% gain in November, even after the October figure was revised from a small loss to a 1.1% gain. '"

"Meanwhile, residential construction spending shrank again in October by 1.6%, bringing the cumulative decline to 11% since peaking last March.'"

"Simonson said he has observed-'no letup in the torrid pace of private nonresidential spending growth.'"

"'For instance, lodging construction — mainly hotels and resorts — jumped 4% in November and was up 71% from the November 2005 level,' he said. 'Electric power construction charged ahead 4% in November and was 18% higher than a year ago. Manufacturing construction had a 1% gain for the month and was 11% ahead of the year-ago level. Health-care construction, mainly hospitals, gained 0.4% for the month and 20% compared to November 2005."

"'The diverse commercial sector, with strong gains in multi-retail and warehouse components, tacked on 1% in November and 11% compared to the year-ago month.'"

"'A closer look at the private residential totals shows new multifamily construction gained 1% in November and 16% compared to November 2005, while improvements rose 0.6% and 6.7%,' Simonson said. 'But those numbers were swamped by declines of 3.1% and 20% for new single-family construction."

"'Energy-and power-related construction, hotels, hospitals and rental housing will all perform well, while single-family and condo construction will sink the totals.'"

"Commenting on the January employment report from the U.S. Bureau of Labor Statistics, released later, Simonson noted that nonresidential construction jobs jumped during the month, while employment related to home building fell off. "

"'In January, construction accounted for one out of five net new jobs in the entire non-farm economy — 22,000 out of 111,000,' Simonson said. 'Not bad for an industry that constitutes less than 6% of total non-farm employment. Nonresidential construction employment growth has been sizzling."

"'Over the past 12 months, nonresidential building contractors and nonresidential specialty trades have boosted employment by 160,000, or 5%.'"

"Simonson said that the job growth should translate into additional nonresidential construction work in the next several months. In contrast, residential building and specialty trades employment slipped in January, bringing the year-over-year decline to 84,000 jobs, or 2.5% of the January 2006 total."

"'I expect home builders will continue to shrink for most of 2007, until they see a marked upturn in home sales,' Simonson said."

"'Part of this reflects a changing mix of construction jobs, away from lower-skilled home building and remodeling to skilled nonresidential crafts,' Simonson said. 'But it may also indicate that contractors are ratcheting up pay to find the workers they need.'"

Labels: Construction Industry, construction jobs, Construction News

Report from MarketWatch on new home construction jobless claims: "Residential construction jobs have fallen by 84,000 in the past year. And economists say the layoffs will soar this year as the production pipeline dries up. Home builders have slowed the pace of groundbreaking, but there are plenty of homes still under construction that were started months ago. As many as a half a million construction jobs could be lost, according to Citigroup economist Steven Wieting."

Labels: Construction Hiring, Construction Industr, Construction News

From the Building Online website: "Spending on home improvements by homeowners is expected to increase at a 3.7 percent inflation-adjusted compound annual rate over the next decade according to a new report released by the Remodeling Futures Program of the Joint Center for Housing Studies. After strong growth earlier this decade where low financing costs and strong returns to house values encouraged upper-end remodeling projects, spending reached $280 billion in 2005. Recently, the remodeling industry has softened.

'The 2006 slowdown in the broader housing sector was reflected in the remodeling industry, with many homeowners putting their improvement activity on hold until the market stabilizes,' explains Nicolas P. Retsinas, director of the Joint Center. Retsinas adds, 'when the industry emerges from its current slowdown, investments in older homes that missed the last round of home improvements, the desire for energy efficiency retrofits, and growing pressure to upgrade the rental stock will ensure a healthy recovery.'"

Read more on the Building Online article, titled, "Healthy Gains in the Remodeling Sector Predicted for the Coming Decade"

Labels: Construction Industry, Construction News

Product and company news from Bloomberg: "Masco Corp., the maker of Behr paint and Delta faucets, posted its first loss in five years and is cutting about 8,000 jobs after a slump in the U.S. housing market. Masco also forecast 2007 profit lower than analysts anticipated."

"Masco will cut 16 percent of its workforce by the end of the first quarter, Chief Executive Officer Richard Manoogian said today on a conference call. Fewer purchases at Lowe's Cos. and Home Depot Inc. and the slowdown in new home construction, which accounts for 40 percent of Masco's sales, hurt revenue in the fourth quarter."

"Masco said profit this year could be less than $1.50 or more than $1.80 a share, depending on new home construction, commodity prices and sales at home-improvement stores. The U.S. housing market fell 13 percent last year, the biggest decline since 1991."

"Sales in the fourth quarter fell 5.8 percent to $2.95 billion, the first decline in at least nine years, because of the new home construction slowdown, which hurt revenue from cabinets and installation services the hardest. Cabinet sales dropped about 12 percent and installation services fell 9 percent."

"Masco will raise prices this year to make up for higher raw- material costs such as brass and copper"

Labels: Construction Industry, Construction News, Material Costs

Building material news from the Associated Press: "Due mostly to the slowdown in new home construction, lumber prices have sunk from a peak of about $1,000 per thousand foot board 18 months ago to around $200 per thousand foot board. In addition, prices for oriented strand boards, or OSB, are at a four-year low."


From Forbes.com: "Lumber and building materials supplier Louisiana-Pacific Corp. on Tuesday posted a fourth-quarter loss due to feeble demand from home builders in the sluggish U.S. housing market."

"'Fourth-quarter sales declined 40 percent compared to the same quarter a year ago, as levels of building activity dropped to the lowest levels we have seen this decade,' said CEO Rick Frost. 'Weakened demand negatively affected volume and pricing in all of our product lines.'"

"Frost cautioned that the first quarter this year 'looks and feels a lot like last quarter, with lower building activity and depressed prices for our commodity products continuing.'"


From Yahoo Finance: "Building Materials Holding Corporation, a leading provider of construction services and building materials to professional residential builders and contractors, today reported sales for the fourth quarter of 2006 decreased 26% from the same quarter a year ago."

"Robert E. Mellor, CEO, stated, 'Our fourth quarter results reflect the on-going correction of inventory levels which currently overhang the housing market. The rapid deterioration of our markets during the second half of the year has made for a very challenging quarter as homebuilders curtail production while excess inventory is absorbed.'"


Finally, from the Houston Chronicle.com: "Mueller Industries Inc., a maker of copper tubes and fitting used in plumbing and refrigeration, said Tuesday the slumping housing market and lower copper prices led to an inventory write down, sending fourth-quarter profits tumbling."

"The latest quarter included a charge of 26 cents per share to write down inventory that lost value as copper prices fell during the period. Mueller said the slumping housing sector also hurt sales volume."

Labels: Construction Industry, Construction News, Material Costs

A news story from the Baltimore Sun: "Black & Decker Corp. reported yesterday that the housing slump continued to cut into sales and earnings and said more restructuring could be on the way."

"Nolan D. Archibald, Black and Decker's CEO, told analysts during a conference call that the housing slowdown resulted in fewer orders from key retailers, which forced the company to scale back production to keep inventories in check."

"'As we had announced in December, we faced a very difficult market environment in the quarter, resulting in a significant decrease in sales and earnings,' he said."

And news on 3M from MarketWatch: "3M Co. said Tuesday that downturns in the housing and automotive markets chilled fourth-quarter earnings growth, and shares of the blue-chip conglomerate lost more than 5% as its outlook disappointed investors."

"'The dramatic slowdown in the U.S. housing and automotive markets had a significant negative impact on sales and gross margins in a handful of our divisions,' CFO Patrick Campbell said."

Labels: Construction Industry, Construction News

Construction Job News from the Daily Press: "It's no secret that construction has slowed on new homes in the Victor Valley and workers are feeling the pinch. 'Since the beginning of the year, our lobby’s been full,' said Robert Lovingood, president of (a) local staffing firm. 'We have a steady stream of people looking for work…especially those in the construction trades.'"

"Few semi-skilled workers, especially those who have been working on mass-produced tract homes, are equipped to transfer over to commercial work. 'They're programmed to do one thing in every house,' said Chris Cox of Cox Plumbing. 'They're set up to do one particular phase of plumbing, and that's all they know. It's electricians, it's framers, it's everything. They only get the opportunity to do just ceiling fans, just switches and plugs.'"

"For workers who know houses, life is bound to be tough at least until summer, possibly another year, said economist John Husing. 'You have to work off the inventory of new homes that was just completed,' he said. 'A lot of builders kept right on building up until December because they didn't want vacant lots on their books.'"

"Some construction workers are transferring over to warehousing work, said Gloria Stanton, manager of the Victorville office of Select Personnel Services. 'I'm hearing, I'll do anything,' she said, not only from construction workers but from educated professionals such as paralegals and accountants."

"Cox said out of 10 housing contractors he used to work for, he is only working for two at the moment. 'It's a cycle. It's like anything else,' he said. 'You ride the wave until it dies and wait for it to pick back up.'"

Labels: construction jobs, Construction News

The housing market reports are out: housing bubble - "Sales of new one-family houses in December 2006 were at a seasonally adjusted annual rate of 1,120,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 11.0 percent below the December 2005 estimate of 1,259,000."

"The seasonally adjusted estimate of new houses for sale at the end of December was 537,000. An estimated 1,061,000 new homes were sold in 2006. This is 17.3 percent below the 2005 figure of 1,283,000.

Also, this sobering report - "Last year's plunge in new home sales was the biggest drop since a 17.8 percent drop since the recession year of 1990. Sales of existing homes fell by 8.4 percent to an annual rate of 6.48 million units, it was reported Thursday. That was the biggest decline in the sale of previously owned homes since 1989."

Labels: Construction News, Housing Starts

From The News & Observer: "Stock Building Supply, one of the nation's largest building-material suppliers, is cutting 1,500 jobs as the U.S housing slump depresses sales and profit."

"Raleigh-based Stock said in November that it was cutting 2,000 jobs. The latest round of layoffs was announced Monday by the company's British parent, Wolseley Plc, which also is closing 22 Stock branches and cutting 500 jobs at its Ferguson plumbing division, which is headquartered in Virginia."

"Officials blamed the company's worsening financial condition on builders starting fewer new houses and a decline in lumber prices."

"'We've responded swiftly to the challenging market conditions as a significant amount of our business is in residential construction,' Stock vice president of finance Jim Major said in a prepared statement."

"Analysts said the housing decline appears to be slowing, but nobody will know for certain if there will be a rebound until the traditionally strong spring selling season begins."

"'The jury is still out,' said Kevin Lapwood, an analyst at Seymour Pierce in London. New home sales in the U.S. appear 'to be leveling out, but there may be some more pain before there's gain,' he said."

"Declining construction during the five months that ended in December reduced demand for lumber and structural panels, which make up 45 percent of Stock's revenue, the company said. Lumber prices have fallen 22 percent, and panel prices are down 35 percent."

Labels: Construction Industry, Construction News

Construction job news from the LA Times: "Some of the decline in retail hiring reflected the housing slump. Hiring among dealers of building materials and supplies was down 2.5% in December compared with a year earlier. Construction remained the biggest drag on the economy, shedding 15,700 jobs in 2006, more than any other sector."

"The question now is when the housing market will hit bottom. Many economists are projecting that the slump in home sales will be over by the end of the year."

"'That may be wishful thinking, said Chris Thornberg, a former UCLA economist. 'I keep hearing that the real estate markets are going to turn around, and it never ceases to amaze me,' he said. 'These cycles take two years, top to bottom, when they pop. We're only a year into it. If anything, this is different because the bubble was so much larger.'"

And news from the Orange County Register. "In the 12 months through December, Orange County's construction industry added jobs at a 0.7 percent annual rate, much slower than the industry's 7.2 percent growth in 2005."

From San Diego's Union Tribune: "In San Diego County, construction firms shed 1,800 workers during December and real estate firms cut 500 positions, according to data released yesterday by the California Employment Development Department."

"During 2006, construction firms in the county lost a total of 5,000 jobs, more than 5 percent of their work force. Statewide, construction firms have axed 15,300 workers, a 1.7 percent loss. And economists say the losses will probably continue."

"'I expect further contraction on single-family home construction,' said Kenneth Simonson, chief economist for the Associated General Contractors of America. 'It's hard to say when that will end. It's really a question regarding how long potential home buyers think they can hold on. Right now, home prices are still dropping and buyers are waiting to see when there will be a bottom of the market.'"

Labels: Construction Industry, construction jobs, Construction News

News from Marketwatch: "Government statistics released this week showed a pickup in the construction of multifamily housing. But the data most likely was influenced by a warm December. And it's just as possible that January's cold snap in many parts of the country could create a reversal in the next set of numbers.

So says Mark Obrinsky, chief economist for the National Multi Housing Council. He expected to see December housing starts, released on Thursday, to be higher than usual. Starts of multifamily housing jumped 42%, according to the Commerce Department.

Truth is, the underlying story in multifamily housing is that markets around the country are starting to normalize, industry observers say.

The craze of condo construction is coming to an end. Renters aren't fleeing apartments to dive into homeownership as they had been in previous years. Rents are rising modestly, and are predicted this year to rise at, or a bit higher than, the rate of inflation.

In fact, many say that we're several years away from the real sea change in multifamily housing. When large numbers of echo boomers, children of the baby boomers, move out of the dorms and into their first apartments, more supply of rental units may be needed. Around the same time, their parents may be interested in downsizing from a house to a condo.

A demographic trend like that could create a genuine spike in building, one that lasts beyond a warm holiday season."

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Labels: Construction Industry, Construction News, Housing Starts

From the Miami Herald on the Construction Job outlook in Florida: "Construction jobs have taken the most direct hit. Job growth in the industry throughout the state has slowed from a peak of 12.8 percent in mid-2004 to 5 percent in November, according to the most recent state figures. Palm Beach County home builder DiVosta Building plans to lay off half of its 552 workers next month."

"Cement maker Titan America has seen a 20 percent drop in its concrete block business alone, which is almost solely for residential building. At full tilt last year its Pennsuco plant in Medley was running three shifts to keep up with demand. In the fourth quarter, it cut back to just one shift at the block plant."

"'Obviously, construction is in a pretty significant slowdown,' said Florida division president Hardy Johnson. The company has shifted its focus from providing for residential sector clients to commercial builders and for Department of Transportation work."

"'I think that '07 is going to be a flat year for us,' he said."

Labels: Construction Industry, construction jobs, Construction News

Homebuilder News from MarketWatch: "Despite contentions that the housing market is forming a bottom, 2007 will see 'a continuation of the challenging operating environment' for home builders, wrote Raymond James & Associates analyst Rick Murray in a report Wednesday."

"'Our fundamental outlook is one of caution, believing that the slowdown is likely to be longer in duration and more difficult than many are forecasting based on inventory levels that are stubbornly high and home prices that are broadly unaffordable,' he said."

"Many residential builders are also taking charges on real estate holdings that have fallen in value, and as they write off land options they've decided not to pursue. 'Since we think home-price declines will continue to pressure earnings, 2007 write-downs could equal 5% to 6% of equity written off in 2006,' wrote Deutsche Bank analyst Nishu Sood, estimating that impairments are likely only half-way done."

"There could also be an upcoming 'spike' in impairments for builders set to report financial results after wrapping up their fiscal years at the end of December, 'due to the added rigor of year-end accounting reviews and the desire to minimize next year's fiscal write-offs,' Sood added."

Labels: Construction Industry, Construction News

From the LA Times: "The current rate of construction should be accepted as a 'new mentality' for builders, who pushed up the pace of building to near-record levels from 2003 to 2005, Nevin said."

"'That type of massive increase bent the industry out of shape,' he said. 'It caused lot and land prices to wildly accelerate, material and labor costs to skyrocket and trade contractors to throw away their standard profit-measurement tools.'"

Labels: Construction Industry, Construction News

From the Colorado Gazette - "What a difference a year makes. In 2005, home construction in Colorado Springs and El Paso County soared to a second straight record-setting year. In 2006, the pace of home building fell to its lowest level in more than a decade."

"The 2006 slowdown delivered a blow to the construction industry, which employs thousands of carpenters, framers, painters and other workers. Several builders, from local firms Vantage and Classic Cos. to national companies such as Pulte, said they laid off workers when production sagged. The slowdown also was felt among plumbers, electricians and other subcontractors."

"Heidi and Greg Smith, who own Affordable Plumbing and Heat Inc. in Colorado Springs, said they were hit by a one-two punch in 2006. First, prices for copper and other materials skyrocketed. When the company hoped to offset those higher costs by doing more work, home builders cut back on construction. The result: Affordable Plumbing laid off 26 of 47 employees."

"'Instead of the subs being able to recoup the losses, building is down by 25 percent,' Heidi Smith said. 'So now it's a fight to get the work, and you have to bid as low as you possibly can to undercut everybody else to get the work.'"

Labels: Construction Hiring, construction jobs, Construction News, Small Business Advice

From Manufacturing.net: "A slowdown in home building is likely to end the record run enjoyed by lumber manufacturers over the past four years.

The Western Wood Products Association, which represents lumber manufacturers in 12 Western states and Alaska, said in its forecast that lumber demand fell in 2006 and is expected to slow further during 2007.

A decrease in housing construction is expected to reduce lumber demand in 2006 by 3.2 percent to 61.9 billion board feet, compared to the all-time high of 63.9 billion board feet recorded in 2005. The slide in demand will continue into 2007, with WWPA forecasting total lumber use at 57.1 billion board feet, a decrease of 7.2 percent.

The WWPA expects new housing starts will be down nearly 9 percent in 2006, and fall another 10 percent to 1.69 million in 2007. Residential construction is the largest market for lumber, accounting for more than 40 percent of the lumber used each year.

The association said the volume of lumber used in repair/remodeling is anticipated to decrease as well, though not as sharply. WWPA anticipates repair/remodeling use of lumber to fall 2.6 percent in 2006 and nearly 6 percent in 2007.

'While home prices will still fall in some areas, we think that housing starts and home sales are nearing a sustainable rate,' said Kevin Binam, the association's chief economist. 'But construction is going to be lower than we've seen in the past few years and that will mean less demand for lumber.'"

Labels: Construction Industry, Construction News

Labels: Construction Hiring, construction jobs, Construction News

Construction job news from the Contra Costa Times: "It was bound to happen. The job market for home building in the East Bay has begun to stumble, halting a strong run. The pace of employment expansion in the housing sector is a fraction of what it was earlier this year."

"Only last spring, residential construction was booming in the East Bay. Jobs in home construction were being added at a 10 percent annual rate in April and May. But by October, jobs were being added at a 3.5 percent annual rate."

And from Florida's TC Palm: "Layoffs at another leading Treasure Coast homebuilder again raises questions as to when the new-home market will rebound. DiVosta Building Corp. executives said Tuesday they will lay off 218 employees in the Treasure Coast and Palm Beach County."

"'I think this is a continuing indication of larger national builders downsizing to accommodate the changes in the residential housing market,' said Don Santos, past president of the Treasure Coast Builders Association. 'I think there's a lot more of this going on in the field, but we don't hear about it.'"

Finally, from the Associated Press: "Alex Barron, who follows homebuilders for JMP Securities, said the industry will get worse before it gets better. He said with so much inventory, builders like Hovnanian must cut their prices to compete."

"'Until those inventory levels come more in line with historical levels, it's going to be very difficult for builders to show an improvement,' he said. While Hovnanian posted a large write-off, he said the company is being more realistic than other large homebuilders 'about how deep this current downturn is.'"

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Labels: construction jobs, Construction News

Some more construction reports: "Black & Decker Corp., the biggest U.S. maker of power tools, cut its annual profit forecast for the third time after a U.S. housing slump 'significantly' reduced sales. There may be 'additional pressure on our earnings,' said CEO Nolan Archibald."

"The slowing housing market also caused Illinois Tool Works Inc., the maker of Duo- fast nail guns, to cut its profit forecast. 'It's spreading, and we don't know how far and how wide it's going to spread,' said Marvin Roffman, president of Roffman Miller Associates in Philadelphia, which manages $390 million, including Black & Decker shares. 'Be prepared for more disappointment from Black & Decker and others' who rely on the housing market."

"'Most disappointing, in our view, is Black & Decker expects their disappointing trends will continue well into 2007,' wrote Michael Rehaut, analyst with JP Morgan."

Labels: Construction News

The Worcester Telegram in Massachusetts: "In times of tough housing markets, the remodeling industry has historically seen a boost as homeowners tap into their equity to fix up their properties to sell or meet their changing needs. But after years of double-digit home price appreciation, the market is in the midst of a correction."

"Area home prices have dropped more than 4 percent since the first of the year, and Central Massachusetts remodelers say their jobs have slowed down or been scaled back from what they were even a year ago."

"'I've seen everything since the early 1980s,' said William J. Morin, owner of Bill Morin Construction in Northbridge. 'I've been through three recessions. I haven't seen it this bad. I would average almost a call a day, but now I’m not getting a call a week.'"

"Guy A. Webb, executive director of the Central Massachusetts Builders Association, said some homeowners who would pay for remodeling projects with their home equity have probably already used it for other things."

"In his own contracting work, Mr. Webb said, more than half of his customers used the equity in their homes to pay for their projects. 'Tapping into equity is very common,' he said."

"'I think my membership is pretty well-prepared for this,' Mr. Webb said. 'They scaled down their operations already. I assume some let go of some employees. A lot of builders and remodelers… just use subcontractors now. They're just calling them less.'"

"Kenneth R. Gaumond, owner of New Surroundings in Auburn, said the housing market correction has not resulted in more home improvement spending, as it had in the past. 'Spending is down everywhere,' he said. 'People are still more likely to adapt their home to their needs. It's not scaring people away from projects, but they're scaling down their wish list.'"

"During the housing boom, homeowners took advantage of their growing equity, using home equity lines of credit for college expenses and purchases that could be paid off more cheaply than with a credit card's higher interest rate."

"'They're continuing to borrow, but at a slower pace,' said Gus Faucher, director of macroeconomics at Moody's Economy.com. 'Price growth (in homes) has come to a halt. People have been borrowing against their equity. And there is less equity. People are strapped. There's less ability to borrow.'"

"George Yacik, a VP a New Jersey firm that studies the home mortgage market and home equity lending, said the dollar volume of home equity borrowing in the Worcester area is about half of what it was last year. Dropping house prices have an effect, too, he said. 'That certainly plays a role. Their equity is not growing like three to five years ago. People have been tapping their equity all along.'"

"Walter Plew, owner of Gemini Home Improvement in Worcester, said that with the slow market and oversupply of houses, there is evidence they may be doing less. 'Last year and before, with the market up, there was more money available to spend,' he said. 'They've dropped doing the big kitchen and bathroom. For now, they're doing painting.'"

"'The lumberyards, Home Depot, the subcontractors, they all say it's dead. Builders are going into the remodeling business. That was always the golden egg when home sales dropped off. There's a lot more people in the business now,' Mr. Morin said. 'Mr. Morin, who has been in business 21 years, said the volume and scale of his jobs now are less than in previous recessions."

"'In the past, when new construction slowed, home improvement increased,' Mr. Morin said. 'Now, new construction and sales of existing homes are in the gutter. Values are dropping as well. Home improvement is off. People have less disposable income than they had five years ago. I make less money now than I did five years ago.'"

Labels: construction jobs, Construction News, Remodeling Jobs