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Loren Faulkner

California Construction Storm Brewing On Three Economic Fronts
February 6, 2008

What are your thoughts on how the California housing slowdown will affect your business in 2008? Two more categories will follow... 

By Loren Faulkner

It may not become the “perfect storm” but three “bad weather fronts” are headed toward California’s construction industry in 2008 and beyond. Bad enough to go into storm protection mode:

#1. The Housing Slump

The sub-prime mortgage fiasco has hit California hard. The trickle-down effect of foreclosed mortgages, slowdown of new housing construction, and lost construction jobs, has yet to peak. Kenneth Simonson, Association of General Contractors (AGC) chief economist, told California Builder & Engineer recently:

“Falling property values and sluggish sales-tax receipts will hold down public construction budgets. The huge overhang of unsold homes will require sellers to lower prices substantially. If they are willing to do so, home sales may pick up by midyear. But it will take several additional months before homebuilding resumes.” However, the time lag could be much longer, according to other analysts.

Michael Bobeczko, of Sukut Construction, one California’s largest grading contractors said, ”The downturn in the residential market is going to affect the construction industry hard in 2008 , especially the dirt moving contractors.  I think it is going to stay down for another year or two. A lot of people have a lot of equipment parked right now.  It’s tough to finance engine re-builds or buy new equipment if your equipment is parked, that’s probably the biggest problem facing the industry right now.”

Posted by Loren Faulkner on February 6, 2008 | Comments (0)