Falling Numbers

Economists' predictions for employment in the housing industry are grim. With first-quarter housing starts and building permits down nearly 25 percent and 27 percent respectively, forecasts for layoffs in residential construction are topping off in the half-million range. And that's not including related manufacturing jobs, which puts the number closer to a million.

“I don't know how we can have a one-third drop in housing starts and completions and avoid very significant layoffs,” says Citigroup Senior Economist Steve Wieting. And while he notes that the housing cycle has gone through “bigger booms and busts” in the past, he still contends that gross job loss across the industry could exceed 500,000.

He's not alone. Economists at Goldman Sachs, Merrill Lynch, and Northern Trust are all waiting for the ball to drop on residential builders and specialty contractors. “I don't think this thing will turn around quickly,” says Paul Kasriel, director of economic research for Northern Trust. “You will see some sharp drop-offs first.”

In fact, some economists are wondering why such cuts haven't already been made. Between March 2006 and March 2007, housing completions were down almost 30 percent, yet employment for residential builders and specialty contractors only fell 4 percent. In a cyclical industry where payroll numbers often follow completions, this lag time seems longer than normal.

Dave Seiders, chief economist at the NAHB, credits much of the disconnect between productivity and employment to false industry classifications and a shortening work week. He says companies that are considered residential are gravitating towards the non-residential market, maintaining their numbers and not reclassifying themselves.

That, combined with dwindling work hours, has helped payrolls hold out, he says. “If you shrink the work week enough, you don't have to reduce labor.” Seiders still expects employment numbers to go down, but doesn't think there will be a real “thud.”

Nouriel Roubini, professor of economics and international business at the Stern School of Business at New York University, disagrees. “You either have a project and use the workers you need, or you lay them off. To do anything else doesn't make much sense economically,” he says. Roubini thinks big hits are right around the corner, predicting layoffs around 40,000 to 50,000 per month, starting later this year. He says that undocumented immigrant labor has been bearing the brunt of initial cuts for months, as represented in the massive decrease in remittances sent abroad. But those layoffs are going to start to affect reported payroll numbers soon. He doesn't see the market bottoming-out until the middle of 2008.

While opinions may vary in terms of the immediate future of the housing market, one thing can be agreed upon: We're not home yet. At the close of the first quarter, unsold housing inventory was at 2.18 million units and homeowner vacancy rates nationwide were at a historic 2.8 percent. The NAHB's Housing Market Index declined in all three categories in April, with current single-family sales, expected sales for the next six months, and expected traffic of prospective buyers all falling.

“There is a fundamental disequilibrium in the market now. Supply exceeds demand,” says Northern Trust's Kasriel, who predicts that housing completions should bottom out during the fourth quarter of this year, with job losses to follow. He also agrees that layoff predictions near 500,000 aren't too far off the mark.

Faced with the forecasts, home builders both nationally and regionally have responded in different ways. Centex Corp., the fourth largest home builder based on closings in the U.S., has had a 23.1 percent reduction in ongoing operations since May of last year. The SEC filing with the updated headcount came in almost two months after Centex posted a $22.3 million loss at the end of the fourth fiscal quarter.

Regionally, Orlando, Fla.–based Park Square Homes has trimmed its numbers by 40 percent, from 276 to 160. “We're down to the bare bones of the company,” says Suresh Gupta, Park Square Homes' CEO. He does not anticipate any more layoffs.

It's hard to say when things are going to stabilize and when employment numbers will shift. The NAHB's Seiders says that his forecast is an optimistic one, possibly too optimistic. While hoping that construction value will improve slightly in the second half of the year, he admits, “We'd be deliriously happy if that happened at this stage in the game.”

HOLDING OUT

SOURCES: DEPARTMENT OF LABOR STATISTICS AND THE U.S. CENSUS BUREAU

Writer's Block

Allstate stopped writing new homeowners policies in California earlier this year as a way to help control its disaster exposure in the state, which is prone to wildfires and earthquakes. The move does not affect current customers. A representative with the company says the move to stop writing new policies in California was not driven by insurance rates, but was purely a move to limit the company's exposure to catastrophe.—N.F. Maynard

SOURCE: THE ASSOCIATED PRESS

Sluggish home sales in many metro areas have made it more difficult for corporate employers to negotiate job relocations, according to a 2006 Prudential Relocation survey on mobility trends. Sixty-one percent of survey respondents cited cost of living and housing concerns as a reason not to uproot, while 22 percent voiced specific fears about being able to sell their homes. As a result, some employers have begun implementing “loss on sale” programs, which offer compensation for a loss in home equity due to job relocation, to sweeten the deal for top recruits.—J. Sullivan

SOURCE: MARKETWATCH

Police officer Gene Whitley in North Little Rock, Ark., was so alarmed by rampant theft at local construction sites that he did some research on how other states responded to the problem and took his concerns to the Arkansas HBA and state Rep. Lance Reynolds. The result is a new law that goes into effect statewide this month that classifies a theft of $500 or more from a permitted or licensed construction site as a Class B felony, punishable by five to 20 years in prison. The new law covers all materials used at a construction site, right down to the dirt.—S. Zurier

SOURCE: KATV

In an effort to promote mass transit and make housing more affordable, several cities are loosening developer requirements on parking spaces. Seattle, San Francisco, and Portland, Ore., have reduced or eliminated parking space requirements. Houston is reviewing requirements along its light-rail line. Planners say it can lower the cost of a unit by $30,000 or more.—P. Curry

If you're a builder looking to put an architect on your payroll, or an architect in search of greener pastures, look no further than www.architectjobsonline.com. The recruitment site, sponsored by BUILDER sister publications ARCHITECT and RESIDENTIAL ARCHITECT, offers resume and job postings, salary data, a cost-of-living calculator, industry news, blogs, and an events calendar. Watch for even more site features to come, including a resume critiquing service and virtual career fairs.—J.S.

The Midwest was the top destination in 2006 for employee transfers within the U.S., according to Atlas World Group's 40th annual Corporate Relocation Survey. At 29 percent, the Midwest was followed closely by the South and the Northeast, both at 22 percent. Relocation to Western states was at 14 percent, followed by the Southwest at 8 percent and Central states at 5 percent. About 30 percent of the responding companies said they expected an increase in relocations in 2007.—P.C.

Looking for ways to safeguard against electrical fires in the home? Arc fault circuit interrupters (AFCIs), a preventive technology endorsed by the National Fire Protection Association and the U.S. Consumer Product Safety Commission, take fire prevention a step above standard circuit breakers. AFCIs detect high-intensity heat conditions that can lead to burning particles inside wood framing and insulation. A new Web site sponsored by the National Electrical Manufacturers Association gives the lowdown on AFCI technology, including safety benefits, product specs, electrical code requirements, installation guidelines, and links to AFCI manufacturers. Visit www.AFCIsafety.org.—J. Caulfield

Block by Block

A new Web site for sustainable building professionals goes live.

Cambridge, Mass.–based media company Blue Egg has launched what it is calling the largest online business resource for sustainable building professionals.

“Green Building Blocks is the only site offering a comprehensive set of resources to help builders grow their practical green skills, showcase their work, discover green products, and find green partners,” says Patti Purcell, co-founder and president of Blue Egg.

Purcell says Blue Egg's research found that there are three recurring roadblocks builders have with green building: They can't find products, have difficulty finding other green builders, and have a hard time articulating the benefits of green building to their buyers. The site is an attempt to change that.

Launched in partnership with Building Green, www.greenbuildingblocks.com is a free site with a vast compendium of information pertinent to builders and anyone interested in green building. Its directory allows builders to find other green building professionals such as architects, mortgage brokers, and HVAC contractors. It offers details on certification programs, climate regions, and building specialties. And it also updates builders on trends and lists nationwide green building events.

A sharing component of the site allows builders to upload project images and text on what makes each project green. Finally, it has a green product guide with 1,900-plus certified products and information on what makes them green, Purcell says.

“By 2040, this country will have 100 million more people, and builders will be building homes to accommodate them,” Purcell says. “We have to make sure they are using the right materials and building the right way.” - Nigel F. Maynard

Rent-a-Credit

A loophole allows consumers to rent out someone else's good payment history.

Mortgage lenders are being warned about a practice that can make them think borrowers have better credit than they really do. For a fee to a credit rental company, consumers can boost their credit score by essentially renting another person's good credit history. It's called credit piggybacking. And, in nearly all states, it's legal.

Consumers are using a provision in credit card law that permits card holders to add authorized users to their accounts. After a few weeks, the payment history of the primary card holder flows through to the authorized user's credit report. Typically, authorized users are spouses and children, but they don't have to be.

One company says it will raise a customer's credit score by as much as 200 points. That could move a consumer from being considered subprime to being offered terms reserved for those with stellar credit.

Critics say that a consumer who artificially increases his or her credit score and then uses that information to obtain a mortgage is committing mortgage fraud.

“This clearly is fraudulent,” says Craig Watts, public affairs manager for Fair Isaac Corp., the company that created the FICO score that most lenders use to assess creditworthiness. “The only reason to engage in this kind of service is to deceive lenders.”

The Federal Trade Commission (FTC) is investigating piggybacking, says FTC spokesperson Claudia Bourne Farrell. In Nevada, where the practice is illegal, the state's mortgage lending division recently alerted mortgage professionals that they could face sanctions if they encourage or participate in the practice; consumers could face criminal charges.

Lenders should pay close attention to borrowers with credit reports that list them as authorized users on credit cards and ask for proof of their relationship to the primary card holder, says Terry Clemans, executive director of the National Credit Reporting Association.

“It's gaming the system,” Clemans says. “The down side is someone who gets into a mortgage they can't afford to keep.”

Communication Breakdown

Western unions want Pulte to pressure contractors for safer jobsites.

Under normal circumstances, Pulte Homes' annual shareholders' meeting in Birmingham, Mich., on May 10 would have been uneventful: The builder declared a 4-cent quarterly dividend, and its CEO, Richard Dugas, lamented sodden market conditions.

But the meeting unexpectedly became a forum for workers and union organizers protesting unsafe working conditions at Pulte's job-sites in Arizona and Nevada. Company officials cried foul. “This is part of an ongoing harassment campaign” that began in Phoenix and Las Vegas last summer, says Pulte spokesman Mark Marymee.

About 30 workers and union reps flew into Michigan to state their grievances about safety, hourly pay, and healthcare benefits, as they hadn't made much headway exacting concessions from Pulte's subcontractors, specifically Arizona's dominant HVAC contractor Chas Roberts, as well as contractors Bean Drywall and Metro Valley Painting in Arizona, and Hutchins Drywall and Burnham Paint and Drywall in Las Vegas.

“This is not a union or nonunion issue; it's a civil rights issue,” insists Manny Gonzalez, a marketing rep for the Phoenix-based Sheet Metal Workers International Association, which accuses Chas Roberts of withholding safety equipment and denying medical attention to workers hurt on the job. Victor Diego, organizing director for Phoenix-based District Council 15 of the International Union of Painters and Allied Trades, says his workers' “most critical” demand is for water and safety masks on the jobsite.

Marymee counters that Pulte “fully supports” safe working conditions and has been recognized by OSHA for its jobsite safety in Las Vegas. Gonzalez and Diego deny that their ulterior motive is to organize workers in two markets where neither union has penetrated the residential construction sector. Robert Masciola, deputy director for the AFL-CIO's Center for Strategic Research, adds that if Pulte and its contractors continue to resist change, the unions will take their message to the public. - Jahn Caufield

Deep Impact

A new road impact fee in a Virginia transportation bill catches builders by surprise.

Virginia finally passed a transportation bill this year, but builders are not happy about an open-ended road impact fee they claim Gov. Tim Kaine slipped in at the last minute.

Mike Toalson, executive vice president of the Virginia HBA, says the builders plan to fight the additional impact fee next year during the 2008 legislative session. The new charge, which expanded road impact fees to 67 municipalities statewide, is far different than the compromise legislation that the HBA supported.

The governor has the power to veto a bill, sign it, or send a measure back to the legislature with amendments. “What he sent back was a substitute bill that was virtually impossible to amend,” says Toalson, who claims that there was no public debate about the added impact fee. “It was sent back in a form in which legislators either had to vote yes or no on a single day,” he says.

Delacey Skinner, a representative for Gov. Kaine, disagrees with Toalson, saying there was ample time for public comment on every aspect of the bill.

Toalson says the HBA worked closely with state officials to craft a law that would raise $2 billion annually for transportation improvements. The new law raises numerous fees statewide and increases the grantor's tax—the tax paid by sellers of real estate—in the Northern Virginia and Hampton Roads regions.

“We said the industry would pay its fair share [of infrastructure costs] ... but the thanks we got for stepping up to the plate was this late addition,” Toalson says. - Steve Zurier