As I mentioned in earlier this year, we sold our house, and moved late March.
Since settling in, we started some work on a house that was 50 years old, pretty much all original condition. We extended a half bath into a full bath, renovated the upstairs bathroom (Mrs. Big Picture called it "The ugliest bath in America"). We put in Central A/C; In the den, we had to replace the rotting sheetrock in one wall, and we added high hats, tiled the floor with slate, lots of other little items. An old tree that was hanging dangerously over the main part of the house had to be pulled down, and as long as we were doing that, we yanked out all of the overgrown shrubs in the front of the house.
What’s been amazing — and very different than the last renovation work we did 3 years ago — is just how quickly and easily contractors have been to find:
• The tree folks removed two big old trees, and ground the stumps down to sawdust — a week after we hired them;
• The bathroom and tile guys were supposed to start late August – and due to cancellations, they began work a month early. They are just about done — 4 weeks before they were scheduled to start;
• Keyspan Energy installed the Central A/C — only a week after giving us an estimate, a crew of 6 guys came to the house and installed a 3 1/2 ton Trane unit, and all the venting;
• On Friday, we spoke with the painter, who was highly recommended by friends. We needed them to pull down old Wallpaper, spackle, prep, and paint the full interior. When are they going to start work? They began yesterday. Oh, and they were exceedingly reasonable;
In short, every contractor we spoke with, booked, or began work was unbelievably available, flexible on time, negotiable on price.
Perhaps this recent headline has something to do with it: Construction job losses could top 1 million.
While BLS is reporting that construction job losses are de minimis, the reality int he real world is that Job losses in the construction sector are significant. Unlike what you may have heard, I do not believe nonresidential commercial construction is anywhere near offsetting the loss on the residential building side:
"Construction employment fell about 15 percent in both the
1990s and 1980s recessions, and it dropped about 18 percent in
the recession of the mid-1970s, according to the Bureau of
Labor Statistics (BLS).In each case, the sector’s declines were far steeper than
overall job losses, and recovery took longer. But in the 2001
recession, declines were relatively modest as consumer-led
demand offset weak business spending.About 7.7 million Americans are employed by construction
companies, according to the BLS, down about 75,000 from a peak
in September 2006. The sector’s unemployment rate of 5.9
percent compares with 4.6 percent for the overall labor force. A 15 percent decline now would mean more than 1 million
jobs lost."
According to BLS economist, Chris Goodman, there is a closely correlation between construction spending and nonresidential commercial construction job cuts — on about a 6 month lag. "Construction spending in June fell for the first time since
January, while private residential construction posted its 16th
straight monthly drop."
~~~
During the boom, contractors were unbelievably busy, non-negotiable — and bit difficult, given all the demand. Not surprising, that is no longer the case these days.
Anecdotal evidence for sure — but the degree and severity of the change has been quite astonishing . . .
>
Source:
Construction job losses could top 1 million
Nick Zieminski
Reuters, Sun Aug 26, 2007 12:34PM EDT
http://www.reuters.com/article/ousiv/idUSN2636970820070826
Bingo.
“Anecdotal evidence for sure -”
Evolving to statistical, then to, empirical…
Here in south FL, I just had a new pool installed and an old one filled in. Three contractors got into a bidding war and my pool was done at aprox. 45% under budget including the landscaping surrounding my new pool…. I wish that I had more that needs to be done. Some of the contractors that I have worked with over the last couple of years are sounding desperate. It’s kinda nice because they used to be so f&%$ing arrogant and abusive.
Econolicious
My wife’s brother-in-law is a tiling contractor in Southern Cal. For the past few years, my skeptical ears have been told over and over, “He only does high end stuff — you know, people who have lots of money and won’t be affected by any downturn.” Well, you can guess what’s happened — he had to let his guys go for the summer, his wife has gone back to work (6 days last week), and I still haven’t heard what the fall (autumn, that is) will bring. Damn, and right after they bought that new plasma TV. ouch.
Other signs to look for: Harley’s, power boats and RV’s for sale in front yards. Funny how these guys now return calls and show up when they say they will.
Barry,
I’m only guessing but I would venture that most of your subs spoke English? Perhaps not, if the ‘high dollar’ guys are laid first.
I live in the Charleston, SC, area and a builder-friend of mine just started his own business because he detects that the worse is over here. In the next few weeks, building will begin on two new homes on my street. Another friend of mine is the broker-in-charge of a major real estate company and he doesn’t see any significant softening in sales going forward. I wouldn’t venture to speculate on the local market here but there are certainly areas that are harder hit than others…
Oh the horror! Isn’t this when the Fed has to step in and commission the building of hundreds of apartment blocks to keep these people in work?!!
Speaking of anecdotal evidence:
The last housing slump in California ran from 1990 to 1996 (bought my last house in ’96 for about 30% less than the previous owner had paid in ’94.)
If history is any guide, we have at least four more years before any recovery.
Batten down the hatches, we have a long way to go.
Now about that renovation I was planning…
Barry
that house is a teardown. 50 yrs old house is functionally obsolete
The architecture business is still booming away, and usually we feel it first. We do have an international practice though.
IT’s obvious that the contractors are not in a big hurry to leave and locate the next job simply because, for many of them, there is no “next” job. A plumber/HVAC friend of mine has bitched and moaned all year long about business drying up. Part of it is the old mentality of not wanting to work so they got into that business, but it’s starting to affect the people who really want to work. The illegal issue?…….pahleeze….not one at all if you are not cheap.
Ciao
MS
Anyone know the percentage of officially “employed” workers in the construction business versus self-employed contractors? Or the percentage of legal versus illegal workers?
I’ve been suspicious of the construction employment numbers for a couple years. I’m assuming that a great number of self-employed contractors are now under-employed, but not showing up in unemployment numbers. Is this a reasonable assumption? Is the real unemployment rate in construction–relative to 2005–much higher than 5.9%?
I said something about this several months ago.
My grandparents own a welding/machine shop that is in on the minority owned business contracts that are guaranteed. They have seen a huge drop off in some parts of their business. Instead of replacing items they are now doing a lot more repair work (ie the city and businesses would rather go for the lower cost fix and do it again later than all out replace it).
My uncle is a union carpenter. He is having problems keeping jobs for his people. He has been complaining about the market for their services for over 9 months. He does residential and commericial carpentry.
My dad is a union pipe fitter that is having no problems finding work due to the same issues for my grandparents’ welding shop.
All of this is in Kansas City which hasn’t seen the super-inflated real estate values of the coasts or other hot spots but has had a significant pick up in commercial real estate over the last few years.
All of this is anecdotal and I no longer live there but I see and talk with my family on a regular basis.
Our air conditioner/heater was replaced last fall (we are in San Diego and our market had crashed by then) by a company that normally only does new construction work. We knew it was all over then – they were trying hard to keep 12 crews going, but almost ready to lay people off then….
HVAC crews tend to be pretty quick anyway, in my experience as a poor Ph.D. student / building super. I think their business involves having to quickly get people into warm homes or cool homes – there’s almost always an element of urgency to HVAC repairs or replacements. Of course, I’m no longer in that job, thank goodness, and when I was, the housing situation was much better. Perhaps the number of crews has decreased.
on the other side of the coin I’ve had some repair work (removing old window, patch, re-apply stucco and replacing wooden valences with stucco) that went undone for months because the job “was’nt big enough”…several contractors who told me this have called me back basically asking if that job was still available………..
It is not…….LOL
Ciao
MS
I’m happy the economy is working for you and your able to spread that money around.
Tell us the secret. MBA in markets or mega website hits?
Thanks again for a great debate site.
So the best time to buy is after the bottom in housing prices but apparently the best time to renovate is on the way down. Now if there were only a way to coordinate that without having to wait 3/4 of a cycle you could make a fortune.
I guess the trick is to buy your house at the bottom and put up with the dump until after the peak in order to renovate. Of course that would rule out relatives and dinner parties through the cycle.
Such tradeoffs. You’d probably have to consult an economist on the different economic values
A year and a half ago I had to wait 2 weeks for a concrete delivery for my basement foundation. This Monday morning at 7 a.m., I called for a full truck for a footing for a stone wall. The dispatcher asked me when I wanted it. I said as soon as they could…she said “How about 8?” After getting myself up off the floor, I said sure!!!!
the only construction guy I seen lately with plenty of work is the “Handy Man” on the Disney Channel my son watches.
I can’t afford to hire contractors anymore, except for the repairs that are likely to kill me. My family has a genetic propensity for serious injuries from falling off of roofs, so I’m going to hire someone to do that stuff.
I bought a home a few years ago and have been struggling to repair it on my own. I couldn’t afford $1000/window or $20k for siding, so I’ve been putting in the windows myself for about $250/window. Hope to do the siding next year.
The few times I have hired a contractor, it’s been difficult. Many would not return calls or never even show up! Or they would charge *way* too much for a simple job. I hope this turns around with construction slowing down.
Thanks for the blog MS!
These are the same a$$holes giving illegal immigrants jobs tax paying Americans should have had, and pocketing the pay differential.
I say stick it to ’em.
Can someone explain this comment:
What explains the BLS discrepency? Is it just that their measurements are lagging measures? Or am I missing something?
All of this sounds like a bottom to me. These are houses, by the way. Someone is going to live in them; they aren’t going to be empty.
We had similar experience with a wallpaper removal and painting job. We got a quote for the whole job, but started at one room–which they attacked with 5 guys! Ended up doing all the rooms, the foyer, two stair cases, and a hallway. They were timely, never missed a day, were agreeable to progess payments, etc. When I talked to the owner/operator I found out they’d usually be busy and have to do our job over a period of weeks b/c of working with a couple publicly traded home builders…which has not panned out this summer. In fact, he said if we liked his work that he’d appreciate any referrals… Night and day versus our other renovation projects…which I am STILL trying to get the Punch list done upon…
I’ve been hearing the same. Not only are contract jobs getting more scarce- but the bubble created a good number of small businesses that are competing for these contracts, many likely to disappear in the near future.
couple of my observations, the hired help in Loews is getting much better. I’m thinking they are once again hiring former contractors with real world experience.
second and the funnier one is: I get my hair cut at the local Super Cuts and for the past 8 years it’s been all women cutting the hair.
This last time I went in ? Not 1 but 2 hispanic guys cutting hair. WTF? but then I realized there must be a ton of hispanic construction guys that can no longer find work.
md
Interesting situation in Phoenix – which I cannot confirm…
With the alleged disappearance of the construction jobs – together with pending legislation making it difficult for employers to hire undocumented workers AND keep their business licences – there is talk here of net migration back to Mexico.
Dave, that would be very bad for me, being in Phoenix and wanting to sell. I’m just trying to figure out if I sell it for a little under market now, which could be potentially more than I would get in say 6 or 12 months, or if I hold on for a couple of years. There are pluses and minuses to each. If I sell now, I have to rent for a few years, but if I stay, my mortgage jumps because of an ARM reset. Choices, choices…
I’m curious how big Barry’s house is. 3 1/2 ton A/C units don’t cool many square feet around these parts!
Posted by: sujal | Aug 28, 2007 2:17:14 PM
All of this sounds like a bottom to me. These are houses, by the way. Someone is going to live in them; they aren’t going to be empty.
………………………………
the only problem with that statement is that your forgetting a house is a guaranteed revenue stream for your local government
Brendan,
If you have an ARM that is going to reset, the choice is obvious…SELL NOW. Pheonix was oone of the more bubblisious areas of the country and is primed for a fall. what is so bad about renting anyways, instead of paying the bank you pay the landlord. Bet your rent is less each month than your mortgage payment.
Brendan – you could sell it yourself on contract. When the buyer defaults, your that money ahead. Just sell to a smaller guy than you, and not a hood.
“ll of this sounds like a bottom to me. These are houses, by the way. Someone is going to live in them; they aren’t going to be empty.”
I guess you missed it in the WSJ where foreclosures were being auctioned by Wells Fargo and there were NO bidders. So naturally the bank bid One Dollar. Then, based on loan forgiveness, the IRS sent the ex-homeowner a bill for $38,000 in back taxes.
Everything I read says the number of vacant home is rising, not falling as in a bottom.
In SW Wisconsin here I sit on a rotting foundation that we don’t want to spend the $$ on bandaids…we want a replacement or move the house to a new location on the lot. We have money secured already… but…
Do you think I can get anybody to give me a bid?? I have called dozens of contractors, masons, foundations specialists, basement companies! I’ve only had 3 SHOW Up, & not a single one has sent an estimate! One guy, I even gave him a self-addressed, stamped envelope! Please!!!!!!!!!!!!!!!
I am now completely understanding why friends have reported that remodeling is a NIGHTMARE! ANYBODY with ideas on what I’m doing wrong, PLEASE email me!!!!!