Slow Economy Puts Damper on Building Trades

By CHRISTOPHER KAZARIAN
A few years ago, when the economy was booming, building contractors in Falmouth reaped the benefits, often working on large-scale remodeling projects, tearing down older homes and replacing them with newer bigger ones, and building new single-family dwellings.
This year, with the downturn in the market, that landscape has changed, said Falmouth Building Commissioner Eladio R. Gore.
“The biggest change has been the decline in new single-family dwellings,” he said. “A couple of years ago we were reaching or exceeding our building cap limitation of 250 houses per year. We have been nowhere near that in the last couple years.”
This year, he said, Falmouth has yet to issue 100 new house permits, which can cost, on average, anywhere between $2,000 and $3,000, depending on the size of the project. During the housing boom in Falmouth, he said, “we could have 200 to 250 new housing permits easily. We had no permits available in July of one year.”
There have been roughly 600 alteration permits, which cover renovation and remodeling jobs. This number is also lower than the average of recent years, he said.
“The general consensus is that work has slowed,” he said. “Some people are postponing work they had planned to do. Some contractors have had to make adjustments because the work they thought they had scheduled has been postponed.”
In addition, he said, contractors are taking on work they normally would not have done in the past, such as roofing and siding, in an effort to keep their employees busy as one way of avoiding layoffs.
Douglas C. Brown of Brown Building Company, who has 23 years’ experience in the construction industry, said he has felt the impacts of the slowdown.
Over the past decade, he said, he has been constructing custom homes, with remodeling jobs a focus in recent years.
Many of these jobs, he said, are now unavailable. “We are not getting all the jobs we would like because we are being underbid,” he said. In one recent case, he said, he lost a job that normally would be bid at $200 per square foot a few years ago to another contractor who bid $150 per square foot. “That is off as much as 25 percent because of the desire of contractors to stay busy,” he said. “They are willing to work for less.”
He said this has forced his company to adjust to the economy. “We find we keep losing out on bigger jobs, so we are focusing on small remodeling jobs,” he said.
These jobs, he said, are enough to keep his company, which has three employees, busy. He listed window replacement, roofing, siding, and basic maintenance as some examples of projects he has undertaken.
“In the past we were often too busy with big custom homes to do these types of jobs,” he said. “Now, we feel lucky to get those calls.”
He said the change became more dramatic over the past year. The climate, he said, is reminiscent of 1987, when the stock market took a nose dive. At the time, he said, others warned him that this would trickle down to the construction industry, noting that the architect index was really low.
That index, he said, is a national accounting of the amount of prospective jobs architects have. That figure, he said, is as low as it was in the late ’80s. “That is a pretty good predictor that new construction will remain slow nationwide,” he said.
His instinct, he said, tells him that “we are just at the start of the hard part right now. I think guys are really underbidding prices of the larger jobs. They want to keep their crews together.”
That could benefit consumers, he said, because it makes for a great bidding environment. “Right now, contractors are very available,” he said.
While work is steady and he does not see his business being adversely impacted, he may consider more commercial projects, even though “it is kind of cutthroat and a tough way to make a living,” he said.
Although not necessarily seeking commercial work, he said, “I am not discounting anything.”
At middle-sized M. Duffany Builders, a slate of renovation projects, from window replacements to roofing and siding jobs to kitchen and bath remodeling, are keeping the local firm busy.
Owner Michael A. Duffany, who has been in construction since 1971, said these renovation projects are smaller than in years past. While some contractors may not want to work on these types of projects, he was hopeful that it will eventually lead to larger ones in the future, once the market corrects itself.
“We are seeing, with the larger renovations, people are cautious about moving forward,” he said.
He said the lead time for future projects has also become narrower, more in the three- to six-month window as opposed to the six- to 12-month ones that he had been accustomed to.
He, too, said this is reminiscent of previous industry slowdowns although “this time seems to be more severe.”
He had concerns about the impacts this might have on the industry. “Anyone who didn’t have some trepidation wouldn’t be truthful,” he said. “I saw this coming, but not to the extreme this is.”
At the end of this, he said, “there will be contractors in Falmouth who won’t be standing when all is said and done.”
Many residents are looking to do repairs to their current homes to maintain them as opposed to selling them and trying to buy something else. “People are tending to look again at where they are and improve on what they have,” he said.
This is simply a tendency of the market, he said, which goes in cycles.
He attributed the new construction of previous years to low interest rates and a solid economy. Those factors, combined with Falmouth being near the water, made it attractive for large remodeling projects and new construction, including the building of spec homes.
Since the economy has taken a nose dive, he said, there is a surplus of the housing stock. “There are not a lot of requests to build new homes because there is a fair amount of inventory and people can be selective in buying and have someone like us do renovations to make the houses be something they want,” he said. “There are a lot of houses out there for potential homebuyers.”
Impacts to the local industry, he said, will be varied as a result of the economic climate. He said contractors will look for ways to be more price conscious, trying to find ways to save costs for customers without compromising the quality of the project.
In addition, he said, builders may look at the pace of their jobs as one way of ensuring local tradesmen remain busy and work is steady. As an example, he said, “if a customer doesn’t need something done tomorrow and is willing to wait,” contractors might consider working a five-day work week instead of a six-day one.
Having patience, he said, will benefit the construction industry on the Cape. “If the general population doesn’t want to be patient, the next thing you know we will all be standing around,” he said.
While price may be foremost in a consumer’s mind, he cautioned residents about accepting the lowest bid. “You don’t want someone to give you a price you want to hear,” he said. “You want to make sure it will get you the product you want in the end or you may have a contractor walk away from a job if they are working below costs just to stay busy.”
At least one local contractor, Good Builders Inc., appears to be unaffected by America’s financial troubles, thus far.
Despite that, co-owner Stephen M. Good said he is still concerned. “This is affecting the industry,” he said. “It just hasn’t affected my business as of yet. We feel fortunate to be in the situation we are in.”
He defined his company as a small company, working regularly with the same 15 contractors, on custom work for upscale clientele mostly on the Upper Cape.
He currently has three projects that involve tearing down older homes and rebuilding them, as well as one new construction. The projects are in Nyes Neck, Woods Hole, Sippewissett, and Mashpee.
His worry is for the upcoming year, he said, with a major concern being how his contractors will be impacted. “My number-one concern is that they have some place to go to work every day,” he said.
He said that may ultimately mean taking on smaller projects and perhaps traveling farther for jobs.
As to his projects for the future, he was hopeful, yet also realistic. “Do I expect this to affect my business?” he asked. “More than likely.”