Housing slump slashes jobs

Thousands laid off in Md., nationwide

September 01, 2006|By Jamie Smith Hopkins | Jamie Smith Hopkins,sun reporter

Home sellers aren't the only ones pained by the sharp housing market slowdown: So are people who build houses.

U.S. homebuilders and residential specialty trade employers cut 21,200 jobs in May, June and July, usually the peak building months, according to the most recent preliminary numbers from the Labor Department. The statistics, adjusted for seasonal variations, also showed a significant job loss in March.

In Maryland, where the federal government tracks homebuilding only as part of the larger construction, natural resources and mining sector, declines were also evident. Job cuts in May, June and July totaled 2,200. Cuts in that sector accounted for slightly more than half of the state's losses in overall employment in June and July.

Adjusting for seasonal variations can sometimes skew numbers, but the most recent ones match up with what residential industry leaders are seeing.

"Some of the larger builders have laid off as many as 30 percent of their total staff in this area," said John Kortecamp, executive vice president of the Home Builders Association of Maryland. "There's a major trickle-down effect to, for example, framers and drywall companies, and others of that sort."

Chris Rachuba of Rachuba Home Builders LLC in Eldersburg has been getting calls from subcontractors hoping that he has more work for them, a turnaround from the days when there weren't enough subcontractors to go around.

Suppliers that used to be too busy to bother with sales cold calls are descending on him, too. And Rachuba is not a large-volume customer, having been building about a house a month, down from 1 1/2 during the boom years.

The number of homes on the market - new and old - has climbed rapidly this year. More people are trying to sell while fewer want or can afford to buy, prompting builders to offer price cuts and other incentives to try to get rid of unexpectedly excess inventory.

Construction accounts for only 7 percent of the state's jobs, but the economic ripples reach far beyond roofers and new-home salesmen.

Fewer homes sold means less work for real estate agents, loan officers, appraisers, architects and other professionals. It also means less money for retailers. The National Association of Home Builders found that those who buy new homes spend an extra $6,000 in the first year on alterations, furnishings, appliances and the like.

Some economists say the housing slowdown could mean less spending of all sorts by consumers, who have been borrowing against their home equity in the past few years or dipping into savings because those paper gains made them feel wealthier. The evidence of such a slowdown hasn't appeared, but economists fear that it is coming.

"I do think the economy is going to be slowing, and housing is a big part of that," said Charles W. McMillion, president and chief economist of MBG Information Services in Washington. What happens to that industry "is really the key to whether we go into a recession or have a soft landing."

From the beginning of the 2001 recession to the summer of last year, residential investment accounted for more than 15 percent of the nation's total economic growth, according to the Economic Policy Institute, a Washington think tank.

But in the most recent quarter - the three months that ended in June - the national gross domestic product would have grown 22 percent more if not for housing, which was far and away the biggest drag, according to the government's Bureau of Economic Analysis.

Some sectors related to residential construction, such as architectural and engineering services, are growing more slowly, according to federal employment numbers. And the mortgage industry has been feeling the pinch for months, first when interest rates began rising and then as fewer people needed loans to buy homes.

"With the market slowing down, there's been layoffs and just an overall slowdown in the entire business," said Charles J. DiPino Jr., president-elect of the Maryland Association of Mortgage Brokers. "It's been going so well the past five years, you knew it was coming. ... It's not like people are getting laid off in droves."

Some housing-related companies are hiring. Universal Trust Mortgage in Columbia, where DiPino works, has added six employees in the past six months, a notable change for a company with slightly more than 30 employees.

DiPino said small businesses haven't been laying off as many employees as national ones have.

Ryland Homes' Baltimore and Delaware division, which says it operates with a leaner staff than those of its competitors, is in the market for an additional sales manager and is seeing opportunities to work with subcontractors that used to be tied up elsewhere.

"Every week, we get more to choose from," said Earl Robinson, Ryland's vice president of sales and marketing. "We're looking to pick up some of the talented folks that other builders can't keep employed."

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