You should take a look at a post on BUILDER's sibling site, ProSalesmagazine.com, entitled "Is the Construction Industry Functionally Bankrupt?" from Southeastern U.S. home building and distribution veteran Don Magruder.
Its assertion--albeit, one man's observations from a particular professed, and vested-interest vantage point--is that people and firms who intersect with pro dealers for residential building materials and supplies tend to get out over their skis financially. And that tendency, which Magruder opines should have been a lesson-learned of the downturn, seems to be playing out with impunity, even though signs of housing's recovery would suggest that builders and contractors should not be as prone to financial exposure as they are.
Be sure, we heartily disagree with Magruder's conflation of his own organization's experience into a broad allegation that builders and contractors are financially reckless, and factually, "one bad job or unexpected loss away from disaster." We also would not agree that private dealers' diminution in valuation--to themselves or to acquirers--should point a finger at residential builders and contractors as a cause in their loss of value. Risks to dealers' revenue stream are just that. A fact. Don't go blaming unreliable builders as the reason you're not getting your asking price when you're motivated to "get out" because you don't want to weather another challenging stretch of the cycle.
No doubt, Magruder's dead on that cash reserves and cushions are a rarity among firms who are trying to re-ignite business after years lying fallow and practically moribund.
I think that's a fair estimation. Many parts of the residential new construction eco-system are operating at under-par levels of resources--people, cash, time, equipment--and these economic constraints are a reality currently suppressing a full-bore come-back in housing right now. Too, the kind of burden builders and contractors face in the equation is that they need a bunch of cash to start with to put into place upfront in order to have good things happen downstream.
Don's correct about all that. And, there are certainly a share of bad players in that drama. However, remarks like the following go way too far, and paint a picture of the community I don't believe is authentic:
I think more than a third of the companies in the construction industry are functionally bankrupt and looking for a way out. It appears many of these companies do not have the will or wherewithal to withstand another economic slowdown.
And the following conclusion, which seems to characterize dealers' customers--builders and contractors--as a bunch of untrustworthy, financially unsound, criminally selfish lot just may warrant a clarification at some later point.
Importantly, the wisdom in Don's post is that many firms are not enjoying gravy days in the early stages of housing's recovery. It's a thrash. Especially when the nature of housing is that the investment so far precedes the return on the investment.
We're all in this together, and trust, patience, and transparency is going to be one of the ways partners make their way through recovery alive.