Speaking of economics, I’d like to hear from people who are in the trades: small general contractors, electricians, plumbers, siders, framers, painters, masonry/hardscapes, landscapers, flooring installers, heat/HVAC contractors, small remodeling contractors, etc..
I spoke recently with a client of ours who is an electrician and the individual mentioned that there were recent incidences of builders either not paying or delaying payment for services.
- How are fuel prices influencing your small business?
- Has work dropped off in a noticeable manner?
- Are bid requests still robust?
- Have you been asked by builders or Gen. contractors to drop your prices as a sub?
- Are you getting paid in 30, 60, 90 days or longer?
For homeowners that are doing remodeling or home improvements this Spring/Summer season:
- Are you scaling back your projects?
- Are you going to do more work yourself?
- Are you receiving more bids, more promptly?
- How far out are contractors scheduling your projects?
Thanks,
S-Crow
jjl » May 22, 2008 at 10:48 am
I am probably an exception to the rule as we hoping to complete a backyard makeover with swimming pool, fire pit, pool house and outdoor kitchen. Projected to cost $200K. Everything was hired out with the exception of the landscaping which we are doing ourselves. The only part of the project left to do is the outdoor kitchen. I may just put that off until the fall as we are tired of living in a “construction zone” and want to just relax and enjoy the pool this summer. Our swimming pool contractor says they are very busy.
We are also updating my mother’s home to get it ready for the market. Contractors appear to be about 2 weeks out for project schedules, such as painters, concrete layers, carpets, etc. They don’t seem quite as busy as last year when we did other projects.
cheapseats » May 22, 2008 at 11:19 am
Of related interest were Home Depot numbers yesterday,
“Home Depot Inc. said Tuesday it doesn’t know if stimulus checks making their way to potential customers will improve its fortunes this year, as it reported a 66 percent drop in fiscal first-quarter profit.
The firm’s bottom line reflects the concerns many Americans have about declining home values and the rising cost of filling up a gas tank. Fewer people are putting money into their homes and Home Depot is selling fewer appliances, special-order kitchens and other big-ticket items.
”
http://www.chicagotribune.com/business/chi-wed-national-earnings-may21,0,7453098.story
S-Crow » May 22, 2008 at 11:29 am
Yes, I did read about that yesterday. That is good information “cheapseats.”
goin' for it » May 22, 2008 at 11:37 am
My dad is a plumber working up around Mount Vernon/Arlington.
I’ve been keeping tabs on him and the construction situation around there. He recently told me that most of the framers are out of work. He said “The only way it could be worse is if there was zero work.”
Gill » May 22, 2008 at 12:10 pm
I have a friend that works for JAS here in Seattle — according to him there’s no slow down as of yet.
Mirtika » May 22, 2008 at 12:27 pm
We’ll be doing remodeling, almost surely within 6 months (waiting to see if hubby’s new job is “holding”).
It’ll be semi-major–two bathrooms, walls, roof, maybe some kitchen work, too. Landscaping as well. We put stuff off for so long, it’s sorta not gonna get put off any longer.
I’m hoping that all those skilled workers not getting home-building type of work will up the competition for remodeling and we can get good prices for good work.
After the hurricanes of 2005, we couldn’t get a contractor to save our lives. I called and called, everyone booked up to 9 months+ in advance.
I’m thinking they won’t all be booked solid now.
Bad for them. Good for us, I guess.
M.
e-sidedave » May 22, 2008 at 12:29 pm
Trying to get landscaping done. Either: A. everyone is too busy to come out, or B. they are crazy-expensive. I have had plenty of “your budget is too small” and/or “you live too far away.” Our budget is $10K. I didn’t realize that is “small” for a simple lawn and patio. I sure hope this recession hits because maybe then I’ll be able to get my yard installed!
Flotown » May 22, 2008 at 12:55 pm
I’m engaged with a GC on a negotiated bid for mid-sized new construction apartment development in seattle. Our 50% design estimates came back WAY over estimated budget on a unit cost basis – the plumbing, electrical, elevators and painting all came in high. Seems the subs in Seattle at least are still very busy.
Slumlord » May 22, 2008 at 1:10 pm
There seem to be enough cheap contractors available. However, the people who know what they are doing are still busy and I don’t like hiring people whose work will only last a few years. Quality craftspeople are probably always going to have work. The rest will need to find other jobs until the next construction boom.
(Tip: If you are a laborer and looking for work, now is the time to learn how to retrofit homes for energy efficiency and solar panels. Alternatively, get on with building the light rail. We are going to need more rail and streetcar lines in the future. Now is the time to become an expert in these fields.)
softwarengineer » May 22, 2008 at 1:29 pm
JUMBO MULTI-MILLION DOLLAR BELLEVUE CONDO PROJECT SLIDING
The Seattle Times business reported the reason for the “stop work” is the buyers have no buyers for their old condos.
I always did believe the backbone and first domino of any housing market is 1st time buyers, without those, the whole houses of cards crumples.
Can any of you home owners imagine a young family from the potential pool of 1st time home buyers qualifying for your house without drastic price reduction?
Can you imagine if the 1st domino gets drastically reduced, the dominos above it must reduce at basically the same percentage or the houses of cards crumples?
Its logical rules of real estate to me.
Gill » May 22, 2008 at 1:50 pm
I’m a first time home buyer that just bought — found a great interest rate and an affordable downpayment w/ a FHA loan.
Good loans are out there for first time buyers.
alex » May 22, 2008 at 2:50 pm
Friend of mine works for a company that makes windows. They’re laying people off left and right.
TheHulk » May 22, 2008 at 3:38 pm
Hey Gill,
Sure, if I went out to get a housing loan, I would get a great interest rate. Considering I have a FICO score close to 800 and I am willing to put down 20%. The point is why would I buy a house knowing its price is going to dip by another 10-20% in the next 2 years?
George » May 22, 2008 at 3:42 pm
Add this question to your list:
* Are the illegal workers from Mexico who’ve been undercutting you for the last five years starting to leave the area?
The housing slowdown may actually improve living standards for American workers, if it cuts down on the number of “independent contractors” from Michoacan.
Gill » May 22, 2008 at 4:13 pm
“The point is why would I buy a house knowing its price is going to dip by another 10-20% in the next 2 years?”
If you know that for certain, then, yes, you should wait. No argument from me on that.
My point wasn’t that it’s a good time for every first-time buyer to buy, just that it is possible and for some it is a very good time.
SWE was saying the backbone was 1st time buyers and implied it was a bad time for them, but it’s not, depending on your situation of course.
TheHulk » May 22, 2008 at 4:22 pm
Gill,
I would say that SWE is perfectly right. Granted everyone’s situation is a little different. But for *most* 1st time home buyers, I don’t see any advantage in buying right now. House prices are either going to decline (90% chance) or stay the same (10% chance) depending on where you buy these days.
A person who purchased a home 8 years ago has seen *some* appreciation in his home value. So yes, he can afford to buy another house by plugging in that increase in equity into a newer place. Of course whether he can actually sell his existing house is a different issue.
As a first time home buyer I see absolutely no reason to step into this mess. The credit crunch (just look at credit card defaults a couple of months from now), rising inflation and gas prices and tightening mortgage loan standards invariably mean that few people actually have the capability to purchase a house on decent terms. Add to that the knowledge that housing is declining and will be in decline for at least the next 2 years, I dont see how any first time buyer can make a purchase in this market (unless prices collapse by ridiculous levels which would make EVERYTHING scarier.)
Gill » May 22, 2008 at 4:37 pm
“Add to that the knowledge that housing is declining and will be in decline for at least the next 2 years”
I respectfully disagree with this statement — I personally believe that things will be flattening out in the Seattle area and then start to move slowly back up over the next several years, probably starting in 2010.
The point, though, is that neither of us really knows what’s going to happen, so make the decision that’s best for you. Lots of people are still buying homes in Seattle, and I’d be curious to know how many of them are first-time buyers.
Has that been discussed here at all?
Michael » May 22, 2008 at 4:39 pm
GET READY FOR THE DUMBEST FINANCIAL MOVE OF THE BUSH ADMINISTRATION! HOUSING BUBBLE ROUND 2!!!
(think of the immensity of that statement)
It looks like the investment banks are unhappy with having to write down so much bad mortgage debt. The fact that they are able to hold most of this off their books in Structured Investment Vehicles seems to be little consolation. They want to be able to historically value their fraudulent off balance sheet accounting. What they are asking for is the ability to write these off balance sheet assets down at “historic” prices. In other words they want to write down the mortgage backed securities at 2005 prices even if the mortgages are worth far less in 2008. It seems that they feel it is unfair that they should be forced to sell troubled assets in a frozen credit market. I find it ironic that they can complain about the credit market when the freeze is from their own irresponsible lending. In other words the banks made bad loans and overvalued these loans so they don’t trust each other enough to lend money. In order to regain this trust they need the federal government to allow them to tell their shareholders that the bad loans are actually good loans or else all is lost.
So the banks will have every incentive in the world to get people into terrible loans. Why? Because even if the loan goes bad the bank and whoever holds the security still gets to pretend that it is a great loan. Unfortunately the consumer is not as lucky.
Bits_of_Real_Panther » May 22, 2008 at 5:18 pm
Yup, the shutdown of the home equity spicket means that I have to put up with the crappy LP siding I inherited from the original buyer until the market stabilizes. I’m planning on taking a HELOC to pay for it in 2011-12
alex » May 22, 2008 at 6:16 pm
Michael,
I don’t understand this comment:
[the banks want to] write down the mortgage backed securities at 2005 prices.
My question: what does one gain from writing down bad debt at inflated prices?
I thought that “writing down” means to say “I lost all hope of ever getting this money back, and so I’m filing it as an expense”. And who wants big expenses?
Michael » May 22, 2008 at 8:37 pm
The banks keep collateralized debt obigation or mortgaged backed securities in a ‘virtual bank’ called a structured investment vehicle or variable interest entitie. I’m not sure about the difference between the two vehicles but they are both off balance sheet entities. When Citigroup reports earnings they don’t have to mention how these things are doing. The problem for the banks is that their off balance sheet entities are not doing very well because the securities in them – mortgages are going to hell in a handbasket.
The banks don’t want to move these off balance sheet entities onto their balance sheets because it will be a blood bath. The billions in bank losses on bad mortgage backed securities could turn into trillions. No one is really sure what is in the SIVs and VIEs and for good reason.
Banks can actually sell a bad asset (like a mortgage backed security) into one of these off balance sheet entities. The bank is not forced to disclose anything about the transaction including the price or if the asset lost value. It is not unsimilar to what Enron was doing but on a much broader scale. The banks are required to move their off balance sheet accounting onto their balance sheets at a certain point when the off balance sheet entity reaches maturity.
The bank does not want to show investors, regulators and customers billions upon billions of additional bad debt. So they are rewriting the accounting rules. When the off balance sheet entity is moved onto the balance sheet they will show smaller losses of even profitability by showing what the vehicle was worth at some point in the past.
So the bank is actually getting hit with huge losses but only reporting small ones. What this does is allow the bank to create systems that overvalue mortgages and gives them a financial incentive to do so. The consumers that actually pay the mortgage will suffer because the bank does not care if they can pay it off or not.
magnolia44 » May 22, 2008 at 9:41 pm
New outdoor paint… check (myself and $150 in paint and supplies) still lower half to go
Recessed Lighting..check ($1500 or so installed by pops 25 total)
New Roof .. Check (done when after purchase)
Insualtion removal (check myself and a few laborers 2 days work)
So not really scaling back just getting started, but trying to do as much stuff on my own or with family members. Friend who is a contractor has been busy (with various projects) i need him to install some windows. We have a kitchen remodel coming soon Sept or Oct and that one is going to be tough, last i heard was my dad telling me i was looking at 20k for materials alone. Pops is contractor/plumber/electrician so that will help but i have to pay him something and the material costs will sting if nothing changes by that time its full speed ahead.
I did get good news this week and my scheduled gas line install which was going to run me 6k had to be cancelled and I am not too mad about it. It looks like a few extra panels were going to be torn up and King County would want me to replace them as new adding an additional 10k to the project. I guess we can live without gas although it would have been nice. I saved 6k plus an additional 3k on what would have been a furnace replacement.
Ira Sacharoff » May 22, 2008 at 9:41 pm
I’ve got a friend who does small remodeling projects. Because he’s cheap and he’s good, he stays very busy. he told me that a number of his clients are people who had been thinking about selling their homes and “moving up” but are instead staying put and fixing up.
redmondjp » May 22, 2008 at 11:41 pm
Gill said:
“I respectfully disagree with this statement — I personally believe that things will be flattening out in the Seattle area and then start to move slowly back up over the next several years, probably starting in 2010.”
Ahh, yes! The good ol’ stair-step theory of RE price appreciation, which is another way of saying that RE never goes down, as Seattle is Special.
Good one, Gil! Let me know how that works out for you.
Meanwhile, the new McMansion that sold for $999,950 down the street from me in 2005 is now back on the market (bank-owned) for $835K–only a 16.5% drop in just three short years. Hmmm, that doesn’t sound very flat to me!
Buceri » May 23, 2008 at 4:43 am
Prices may stay flat if we get hit by the inflation everyone seems to be talking about. Hence; inflation will make up for value declines.
In any case, your salaries (for those who still have jobs) should go up with inflation, making home prices look cheaper.
gill » May 23, 2008 at 7:51 am
it’s not a theory, it’s a cycle.
Garth » May 23, 2008 at 8:02 am
Ira’s comment is interesting. I am pretty sure there is a chunk of the real estate market (the best part for agents, houses that turn over quickly) that is just gone now.
I think somewhere between 10-20% of the sales activity is not coming back for many years as people are going to be staying where they are on the “property ladder”. Without dependable appreciation, these flipping and moving up methods are now very difficult and risky.
Part time and marginal real estate professionals are toast. Good ones probably need to figure out how to survive as their percentage gets cut by half or more over time.
vboring » May 23, 2008 at 8:04 am
in sum,
jobs associated with new construction are in a bad way
small-scale remodeling business is fine because homeowners are choosing to upgrade their current place instead of buying a new one
large-scale remodeling is on the decline as HELOCs become harder to get.
if you’re in the construction industry, you want to be ready to focus on floors, windows, kitchens, and bathrooms for a few years. mostly with smaller budgets.
alex » May 23, 2008 at 8:21 am
redmondjp: got the MLS# for the 835k McMansion?
b » May 23, 2008 at 9:04 am
Buceri -
If its anything like the inflation of the last 6 years, then salaries will likely go down in real dollars while things get more expensive. First time in recorded history of the US that people are worse off after an expansion, unless you are in the top 1% of course.
Buceri » May 23, 2008 at 9:20 am
b-
I agree; but it seems (according to people in the know) that the upcoming round of inflation will be early 80s style. Nothing like recent inflation.
China is under a huge inflationary pressure these days. These means cheap Chinese crap won’t be as cheap.
b » May 23, 2008 at 9:47 am
Buceri -
Perhaps, however I think since we are entering recession + inflation there is little incentive for employers to increase wages. We will likely just see more layoffs combined with productivity increases and stagnant wages overall.
redmondjp » May 23, 2008 at 10:08 am
alex, see this forum thread (link won’t embed properly for me, sorry) which discusses this house:
http://seattlebubble.com/forum/viewtopic.php?f=1&t=1336
Jimmythev » May 23, 2008 at 11:22 am
I just saw this… look where Seattle falls on the list. I wonder when this ticking time bomb will hit.
http://www.forbes.com/lifestyle/2008/04/17/debt-homeowner-cities-forbeslife-cx_mw_0417realestate_table.html
Ubersalad » May 23, 2008 at 8:00 pm
Major publication like forbes.com and money.cnn.com are worthless to read for local RE phenomenons.