Searching for the Bottom at the Home Builders' Show

Posted by: Chris Palmeri on November 14, 2008

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I visited the Building Industry Association of Southern California’s annual trade show in Long Beach, Calif. yesterday. This is the big show for Southern California homebuilders, where suppliers of everything from appliances to Astroturf pitch their wares.

Folks tried to inject a little fun into the event. The Hooters girls were meeting and greeting at one booth. A company called Universal Truss was handing out Nerf dart guns (Hari Kari anyone?) But the most popular booth was one from Suncoast Framing which had a working bar set up. The theme for the show was “Setting the Stage” for a recovery. Drowning your sorrows was more like it.

In one of the conference rooms, Lisa Grobar, a professor of economics at Cal State Long Beach, predicted the recovery would come next year. Foreclosures will peak in the first half of the year, she said, but not before a second wave of people loses their homes, due to unemployment, not toxic mortgages.

Steve Johnson, of the research firm Metrostudy, made a convincing case that the California market must be bumping pretty close to a bottom. The number of new houses starting construction, for example, is just 13,000. That’s about 20% of what they were two years ago. The state hasn’t seen this little new construction since the 1950s. “We have virtually turned the engine off,” Johnson said.

That wasn’t news to the panelists at an afternoon session on “Surviving a Down Market.” Of the four panel members, three had either changed or lost their jobs just since the show program was printed. The only one who was still at the same company was executive recruiter Kipp Gillian who said he’s gone from getting a 100 resumes a month to 100 a day. Brandon Clements, who recently got laid off from builder Toll Brothers, says he’s been using the free time taking classes to get licensed as a real estate broker and a construction contractor.

Mike Hunter, a land acquisition specialist, said this was now his fifth down cycle in Southern California real estate since he got in the business in the late 1960s. During one he said he didn’t collect a commission check for four years. He had these words of encouragement for those in the audience. “Every single downdraft I’ve been in, we’ve come back better than the previous one.”

Reader Comments

Kipp Gillian

January 29, 2010 1:53 PM

As a follow up to Mr. Palmeri's article we are starting to see some very slight market movements. This is measure by the amount of our former clientele that have picked up new positions. Granted the numbers are low and the positions are not exactly what they're accustomed to doing but it does mean that hiring is starting a small return. Once we can push past the Commercial Mortgage crisis we will see a return to business and the healing can begin. Until we have real lending for acquisitions, construction and refinancing all markets from single family residential, multifamily, hospitality, office, industrial, retail and mixed use will continue to stall and hiring will remain dormant.

Kipp Gillian
President
Gillian Executive Search, Inc.
www.gessearch.com
866-600-0437 x 1

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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