Tough year ahead for homebuilders
Finding a bright spot in the outlook for the residential construction business in 2010 is like trying to glimpse a ray of sunshine in a thunderstorm.
Contractors and industry insiders expect the coming year to be a continuation of tough times.
“It will be as difficult initially as the end of 2008 and all of 2009 with the credit and banking and foreclosure issues and inventory levels,” says Rick Demar, chief executive officer of the Builders Association of Western Nevada in Carson City.
Contractor Mike Clark is one of the lucky few that is still building. Clark is completing work on a 3,400-square-foot custom home and has another custom home just coming out of the ground but after that Clark has no idea where revenue will come from.
“We are very fortunate,” says Clark, whose Reno-based Mike Clark Construction has contracted in the area for nearly two decades. “We can keep a few guys busy, but after the next one who knows. It is about the same all around, and we are very lucky to have what we have.”
Mike Dillon, executive director of the Builders Association of Northern Nevada, says new home construction won’t truly revive in the Truckee Meadows until inventory levels drop. The first-time homebuyers’ credit has significantly helped reduce inventory levels of starter homes, he says. Another important factor would be reduction in the region’s high unemployment rate.
“What could be a bright spot is if we have any job creation here, or if people are moving here from out of state, particularly from California. Nevada looks like a very desirable place to be both for the price point of new homes and quality of life we enjoy.”
With federal stimulus money available to weatherize homes, many out-of-work homebuilders may see an uptick in business through re-roofing projects, addition of energy-efficient windows and other energy-saving measures.
“We are actively working with HUD, the State of Nevada, the energy office and local entities that have some control over that local money to put people to work as soon as possible,” Dillon says. “It is a complicated process, but we are starting to get through that and we are trying to figure out ways we can access those funds.”
Many homebuilders have turned to remodeling for revenues during the severe downturn in new homebuilding. Dillon says BANN member contractors have shifted their business plans to focus on remodel work, and BAWN’s Demar notes that member contractors are being innovative when seeking work.
“You could also call it a survival mode. Guys I have known for 30 years, they are in dire straits right now. If they are going to be a survivor they have got to diversify, and remodeling is a good market,” he says.
Demar says no one expects an increase in home construction until financing restrictions ease.
“We all need a roof but the ability to finance new home construction is difficult right now,” he says. “We need more economic confidence. But you cross your fingers, you hope. We have been through these tough times before and we survived.”
The agreements are designed to split the costs of improvements such as traffic signals between Carson City and developers whose projects generate the traffic increases that trigger the need for improvements.