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Adventures In Construction: Trends From The Trenches

September 5, 2008
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Serial Thief Remains at Large

Following an investigation that included 269 first-hand reports from victims, we’ve identified the thief who stole money from construction firms nationwide.
   His name: Residential Construction Decline, or RCD for short.
   Long suspected as the mastermind behind the revenue thefts, RCD remains at large, continuing to rip profits from nearly every segment of the construction field.
   Victims expressed outrage over the rampage that appears without end. Or is the end in sight?
   Welcome to the second installment of Adventures in Construction: Trends from the Trenches. This blog focuses on the challenges now facing the architectural, engineering, construction and mechanical field.
   Last week Clear Seas Research surveyed our Building Materials Panel and 269 of you responded. Thank you, and keep the responses coming.
   As a group, 42 percent of you indicated residential construction activity has decreased or decreased significantly in your markets during 2008. Every subset of our panel showed double-digit declines in 2008. Net declines were reported by 35 percent of architecture and construction-related firms, followed by 31percent of HVAC firms, 28 percent of flooring firms, 26percent of plumbing firms, and 12percent of walls and ceilings firms.
   Here are some of your reasons for the decline:
   “We have an 11-month inventory of houses for sale right now. The builders can't compete with banks selling foreclosures.”
   “Poor economy and we live in a state with very high taxes.”
   “Oil speculation and sub-prime mortgages. The price of energy is dictated by some yahoos in suits and not real market forces. The energy price increase put the pinch on people who already couldn't afford the homes they bought.”
   “Once again people are scared. All they hear is gloom and doom.”
   “Changing of the guard. It seems to happen every election.”
   “Duh! People can't get loans as easily.”
   “I live in MICHIGAN!”
   Hey, I live in Michigan, too, so my initial reaction is to take offense at that comment. Unfortunately, we’re exporting people to other states at a rapid clip so I really can’t defend my home state.
   There is so much negative momentum that this downturn must be unstoppable heading into 2009, correct? Should you put your tools, design software and product inventory in the attic and find new professions?
   Not so fast. You are far more upbeat about 2009 than I imagined. As a group, 29 percent of you forecast an increase or a significant increase in your residential business next year. Almost one-half believe residential construction activity in 2009 will remain at the same levels as experienced today -- implying the decline has reached a plateau.
   Segments like architecture & construction (-21 percent) expect further declines. But flooring (+11 percent), walls and ceilings (+26 percent), and HVAC (+9 percent) firms anticipate turnaround in 2009.
   Here’s why you think things will improve in 2009:
   “People can’t put repairs off.”
   “The increase will be fed by persons who have held back this year and very likely did not take an expensive vacation.”
   “We will diversify our product offerings.”
   “Only locally, as several large distribution centers are set to begin hiring approximately 2,500 employees with decent wages.”
   “2009 should be better if weather is hot instead of cool and rainy.”
   “Stability in lending markets after culling of ‘bad apples.’”
   “I think a lot of investors are waiting to see what happens in the presidential election before they start to even think about investing.”
   “The bottom has to fall out sometime.”
   Why are so many of you upbeat about 2009? Are you blind optimists? Have you discovered a profitable new niche? Did you win the lotto?
   Post your comments to this blog and share your insights. We need to hear them! 

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