The Damage Varies, But All Agree: Construction Is Hurting

Industry May Be The First In, First Out Of A Recession

March 12, 1991|By Arthur Hirsch | Arthur Hirsch,Staff writer

Richard of Severna Park walked out of the state employment office, facing a cold, idle afternoon. He'd been out of work six weeks, laid off by a home-building firm in Severna Park.

"It's kind of difficult, especially the job I'm doing," said Richard, who declined to give his last name. "It sure stinks being idle, nothing to do. Drives you crazy."

He'd worked for Woodstock Builders for six months and said he'd been in construction for the last seven years, working part time whilein college and full time after graduation. Seasonal layoffs are common in the trade, but in seven years, Richard said he'd never experienced one before.

"If things don't work out, maybe it's time to lookin a different job market," said Richard. "Try something else."

Builders say the county's construction industry -- variously estimatedto account for 15 to 25 percent of Anne Arundel's economic activity -- has slumped since late 1989, with some homebuilders idling nearly all their workers and others going out of business entirely. Builderssay demand for new houses -- especial

ly those priced over $250,000 -- is down, supply is abundant and banks have curtailed the money available for new projects.

How severe is the decline? That depends on the builder you talk with.

Dennis Bolger, vice president of Morris Construction of Annapolis, said: "It's the worst I've seen it, industry-wide. This time last year we had 35 people. We have four now."

"Some of the companies are doing OK," said Richard Alt, executive director of the Associated Builders and Contractors' chapter in Anne Arundel County and southern Maryland. But "by and large, it's safeto assume many contractors had to lay off 20 to 30 percent of their people."

However, W. Dennis Gilligan, a partner in The Gilligan Group, one of the county's biggest homebuilders, said the recession of 1989 and 1990 does not begin to compare with the recession of the early 1980s.

"What killed us in 1980, people just stopped coming," said Gilligan. "Throughout this recession, we've had traffic."

That traffic added up to $2 million in sales in January and more than $1 million in February, Gilligan said. In the same period in 1990, Gilligan said total sales were "maybe half that. . . . Maybe it's turning. We're not out there celebrating yet."

While sales have rebounded, Gilligan said the firm still had to lay off about 15 people over the last nine months, leaving a staff of 44 at the Severna Park company.

Brad Kelley had to close Kelley Construction Co.'s Annapolis office in August after 2 1/2 years. Seven people had worked full time in that office. Kelley's now working out of his home.

"I lost guys that have been on my payroll for seven years. It hurts your feelings to tell somebody, 'I don't have any work.' " Kelley said.

"I think the first people to get hurt (in this recession) was the construction industry," said Kelley. "That was the first indicator. I saw it first off in the new custom-builts. Then the sales calls weren't for large additions; they were for remodels, kitchens and baths."

Milt Horn,president of Mandrin Construction Co. Inc., in Pasadena, said: "Under $150,000, the market is still in good shape, the no-frills, first-time buyer (home). The upper end has a large inventory."

County building permit totals since late 1987 seem to belie the notion of a construction industry slowdown.

The county issued 1,680 residential permits in the last six months of 1987, then 3,332 in all of 1988. In 1989, the figure dropped by almost a third to 2,441. But in 1990,

residential building permits jumped 55 percent to 3,799.

Commercial permits in the same period held fairly steady from 1987 to 1989, but fell a third in 1990, from 111 to 78.

Don Woodrow, chief of the permits division, said that while the residential unit numbers are up, the average value of the homes being built has fallen as builders lean toward more town houses, and smaller and less elaborate free-standing houses.

"Builders are going more for the homes that don't have the bells and whistles on them," Woodrow said. He said he does not have permit totals compiled for January and February, but he said activity is picking up.

"It was a tough winter, no question," said Woodrow.

Horn voiced a complaint heard from several builders: Loans for building projects have become increasingly difficult to find. He said that while interest rates are low for both mortgage and construction loans, banks have raised the ante for builders and developers, asking for "more money up front, more collateral" and better margins of profit on projects.

Because of more intense federal scrutiny in light of recent bank failures and the savings and loan debacle, Horn said "banks require much more documentation" to back up a loan application now than they did in the 1980s. Builders are finding it more difficult to

meet the changing standards, he said.

Gilligan went a step further in his assessment: "For all intents and purposes, you cannot find financing for new projects."

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