Builders feeling the brunt of a slowdown

The construction industry is limping into the final days of the year without optimism for 2007.

Published November 5, 2006

The past five months have not been too kind to John Velge.

Between February and April, the south Tampa general contractor had about 15 projects going on. In the past five months, he's had just a couple, he said.

"We estimated $3-million worth of work this year," Velge said. "But we are going to wind up contracting only $1.2-million."

As the residential market's slowdown unfolds, layoffs and lost contracts are creeping across the spectrum of the building industry.

Subcontractors are leaving the suburbs on a southward hunt for jobs. Trade unions are watching for what could turn out a rich harvest.

The value of residential construction contracts statewide fell in all but two months this year, according to McGraw-Hill Construction.

September saw the biggest year-on-year slide of 45 percent, capping drops of 24 percent in August and 30 percent in July.

In the Tampa Bay area, employment in the construction industry has shed more than 2,000 jobs since May, from 87,000 to 84,700, according to the Florida Agency for Workforce Innovation.

Even that number may be misleading, because it excludes people who are self-employed.

In a good month, Alpine Plumbing of Odessa does about 100 jobs, manager Kyle McCullough said.

By September, that fell by half.

"In December, it'll probably be even less," he said. "In 2007, it could be even worse. Our guys tell us it's a ghost town out there in the subdivisions. It's like working on a Sunday."

Labor cuts followed.

"We've laid off about 15 percent of our field staff in eight weeks," he said.

Pulte Homes and Centex Homes announced cuts of a tenth of their work force this year. Other builders said they slashed in the same range.

"We corrected our work force 90 days ago," said Ben Wilson, a land manager for Ryland Homes.

Smaller builders, like Tarpon Springs' Southern Image Homes, cut a quarter of its staff, said president Alex Mourtakos. Every builder is doing the same, said Mourtakos, who heads the Pasco Building Association.

Southern Image used to build 60 homes a year. Next year? Just 20.

The housing hit is percolating down into the trades that support the building industry.

Gary Brewster, a contractor with Florida Pool Finishers, said his firm is handling half the number of jobs this year, compared to the last.

Ten Brink Underground, a Zephyrhills drainage and sewer contractor, has halved the number of its crews.

The crunch is changing migration patterns. Subcontractors in the suburbs, like masons and framers, are venturing south, and they are often 30 percent cheaper than more established competitors in south Tampa, Velge said.

One more year?

Not everyone is hit as hard.

"We haven't been affected that way because we work on schools, Withlacoochee power company, infrastructure," said Maryann Bishop of Ervin Bishop Construction in Land O'Lakes. "The infrastructure is so far behind residential that we'll be going on for a while."

The numbers bear Bishop out.

McGraw-Hill projects that nonresidential construction contracts in Florida will grow 10 percent this year, compared to negative territory for home building.

The bulls say the market will be back up by spring.

The builders are not so sure.

"We were closing 1,000 homes last year," Wilson said. "We'll be closing 850 this year. But that's not where the drop is. The drop is in future builds. Everybody is down about 40 percent. Next year, we will be down 30 to 40 percent. I think 2008 is when we'll come back."

'Try to make a living'

Governments will soon feel the pinch, if they haven't already.

As coffers dry up, developers are closing ranks to resist anything that may brake growth.

"What can exacerbate all this is the county cranking up impact fees, ultimately making houses unaffordable," Wilson said.

In Pasco County, the developer-dominated Impact Fee Advisory Committee recently gave a unanimous thumbs-down to a proposal to double or triple impact fees.

As the longest year in the industry's recent memory winds to a close, the shakeout may have just started.

It's a time for stoicism.

"What do you do?" said Gerritt Ten Brink of Ten Brink Underground, with a shrug. "You live, you work, you try to make a living."

Chuin-Wei Yap can be reached at cyap@sptimes.com or (813) 909-4613.

Change in value

Residential construction contracts in Florida in 2006, by percent, year-over-year:

September -45 percent

August -24 percent

July -30 percent

June Not reported

May -18 percent

April +12 percent

March -9 percent

February -4 percent

January +4 percent

Employment drops

Employment in construction industry, excluding self-employed, in 2006:

May 87,000

June 86,700

July 85,900

August 85,000

September 84,700