I don’t work as a builder for a living, but am a faithful FH subscriber and have built a few houses, including my own, around my day job at a bank. I’m about to begin a new house for my growing family and am wondering whether I can expect the housing market downturn to result in more value for my subcontractor dollar? My wife is asking me why we don’t just buy something already on the “buyer’s market.” I’d like to tell her subs are hungrier for work, but I’m not sure that’s really the case. Unless I come up with a good answer, I’m destined to live in someone else’s spec house. Please advise.
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I'm about to begin a new house for my growing family and am wondering whether I can expect the housing market downturn to result in more value for my subcontractor dollar?
What about the sub contractors growing family?
Does a down turn (percieved or real) mean that contractors overhead or % of profit needed to stay in business and feed his family has suddenly decreased?
Are your wages where you work being reduced in porportion to this downturn you mentioned?
Maybe you can just find some cheap hacks that show up on a bicycle to do your "subbing".
Sorry.
Gees, we're not a bunch of cut rate jerks here....................
[email protected]
The simple answer is yes, pure supply and demand. However at an individual level it's never that easy.
Some are charging the same and willing to take less work until things look up or they are out of business.
Others are charging less and cutting more corners to make up for the loss in profit or they just don't care. The low end of the market has always been this way, it's just a matter of quality vs. price.
Those who are best able to deal with the downturn are changing the types of projects they are working on to take advantage of areas with less competition, higher margins, etc.
The good deals seem to be with the subs who haven't worked in a few weeks and are jumping at anything to pay this month's bills.
I can't see using many new subs, since the good ones have been so hard to find, but it will be interesting to see how they react when I can show other bids with proven past quality for much less. At the most it's worth giving a new guy who low bids a chance while keeping most subs in place.
I've never met a conctractor who won't let a sub give away his work, although if it's really out of line I'd want some assurance he won't bail halfway through when it's obvious there's no money to be made.
Good building!
Beer was created so carpenters wouldn't rule the world.
Considering that since the present housing boom created a trades shortage, concrete finishing went from 30 cents to a buck a foot in two years, I'm not sure our subs are quite as scrupulous as the ones you encounter.
Gee, I don't know, you sound like the crybaby here. Economic realities, bud. If you grow a bumper grop do prices fall? If China imports 800,000,000 tons of wheat, do prices rise? Do you not think that the supply or lack of supply of Engineers impacts their salaries? Just reality! Of course we could all live in a Communist system and someone could just dictate your wage for you and then tax it 80%. Always an option. Vote for Hillary.
As for prices for subs? I don't think the good subs will cut rate, they will have plenty of work. The new unestablsihed subs, may very well cut there rates to buy business, but then you as the buyer must be careful. Are you getting the best contractor? Is your sub going to cut corners in order to live within his "low" bid?
Who's crying "dude"?
I stated pretty much the same thing you did, just in other words.
As for prices for subs? I don't think the good subs will cut rate, they will have plenty of work. The new unestablsihed subs, may very well cut there rates to buy business, but then you as the buyer must be careful. Are you getting the best contractor? Is your sub going to cut corners in order to live within his "low" bid?[email protected]
Sure, what you said . . . after you cut the guy a new one.
Atlanta86: Has this been helpful to you? Good Southern manners require a response from you.
Thanks to all for the insightful postings. As I said in my initial post, the deicision for me is one of building versus buying. I have for many years been a "custom snob" based mainly on the sad state of the typical spec home in my area. I just can't imagine dropping a large chunk of change on a spec house, then watching the unprimed exterior trim rot, or needing a sweater to stand next to a cut-rate window in the winter (even in Atlanta), or having to retrofit a dehumidifier in my "damp-proofed" but not "water-proofed" basement. I suppose I can thank FH for making me aware of what I'll get for my spec dollar.
Having said that, eveybody has a price, and there is currently a huge inventory of high-end unsold homes in my area. Some are even offering cars as buying bonuses. I'm quite sure I could buy one at or near a builder's cost.
So, the question for me becomes more philosophical. Can I live in a less-than-top-quality house and wake up feeling good about all the money I saved? Or, would I be better off building my own and maybe saving a little on subs, but generally not taking advantage of the great deals to be had in this market?
Random thoughts of a hard to define opinion:
I don't think sub prices will change much in the N GA area (least the areas I'm in). I do think there will be subs going out of business (fewer in business but less work). Consider that much of the work force are immigrants (probably a large contingent illegal) and not much holding them to a particular area.
They're not looking to hold their ground in specific market, they'll move on.
They're transient and will move on to whatever industry will have them in areas that support it. There's nothing holding them to the trades (like schools/licenses).
For the remainder costs of living affect them the same as you & me.
IMHO Prices will hold.
OK, now back to YOUR statement that the question of whether to build or buy is "mostly philosophical." I would call it a matter of values. If you choose to buy a high-end spec piece of trash, why would you feel good about all the money you saved? Or the "free" car you got? Did you get the same quality house as you would if you had one built???NO, you did not. You got a cheaply built house for less money than it would have cost you in a different market. I am currently negotiating with a custom builder to build my house, near Atlanta. If I had bought a spec built house here, yes, I could have gotten it much cheaper than I would have before the housing oversupply hit. But if I had done that, I wouldn't be suffering a philosophical crisis. I'd be living the same hell I've lived all my life: with the constant irritation of the thing falling apart around me. And with the reality of having to pour money into a sinking ship. Not a bargain to me.So, here in the same land of opportunity as you, at an age far too advanced to be doing this, I'm taking on a staggering mortgage because before I die I want to live in a truly comfortable, well-built house that's a pleasure to live in rather than a source of endless annoyance. I want one that will minimize my monthly utility costs. I want one whose wiring doesn't make me nervous about a fire. You know the rest.It's less philosophical and more practical for me.
I think you hit the nail on the head. If the philisophy of quality construction is the primary motivator for this buyer then he should build new with the best subs he can find. pricing will most certainly be competitive. If finding good deals is his thing then buy from the markets offerings and be happy with that. This is a personal issue for him , not a financial. If he is afraid to tell his wife that he wants quality even if it means paying more when bargains are to be had then that becomes a whole other issue revolving around the relationships in his life. Maybe he needs a therapist instead of asking us our opinions."it aint the work I mind,
It's the feeling of falling further behind."Bozini Latini
my opinion?
I think that the trades that have been busy will be busy. The quality comes to the top. The trades that are scrambling are newer/less experienced companies. More at risk for failure. So if you o with a price chopper you may be looking for another trade to finish the job.
Now, I just said that but it's not always true. And may not be true on your home. Probably, you would get through your home OK. Most do. But not always.
What the slow down does for us is to get onto builders schedules that we have been working on for a long time. Earlier this year is a good example. Talked with a super I know about doing thier work. They were happy with thier guy. The previous year they had approached us. Thier guy had gone out of business. We were too busy.
March or so we started talking again. Another of thier scraprs was going out of business. And we were open.
Sometimes the timing has to be just right. The slowdown allows us to upgrade our builder clientele.
So there will be folks cutting price. Only you can roll the dice to see if they will finish.
Since you work at a bank, you probably understand that a slowdown in a sector of the economy usually creates "bargains" for those sector's services. An early indicator will probably be easier scheduling of your subs since their backlogs will begin to shrink. If the situation goes on long enough, you may see some softening of prices among the subs who are trying to survive.
You also need to know what's going on in your area. I'm not seeing much of a slowdown here, but your mileage may vary. - lol
Finally, I wouldn't count on this being a long term problem. Some mortgage lenders and homeowners got caught short, but most home loans are just fine. From where I sit, I think the the lenders will really tighten the screws for a while and then relax a little after the "crisis" passes.
If the past is any guide, no, they won't charge less. Their costs are going up, and they have to live too. What will happen is that they will get fewer jobs, and some of them will decide to go into other lines of work. The cost of hiring them will stay the same or increase, but it will be harder to find good subs.
If the past is any guide, no, they won't charge less. Their costs are going up, and they have to live too. What will happen is that they will get fewer jobs, and some of them will decide to go into other lines of work. The cost of hiring them will stay the same or increase, but it will be harder to find good subs.
From my perspective, the current downturn will become much like the late 80's was in New Jersey.
It already has some of the signs.
Speculation and easy money deals had driven prices thru the roof in the late 80's.
Speculation and cheap/easy money have driven prices thru the roof in 2003-2007.
When things started to slow down in 1987.... no one wanted to believe it. They kept building.
18 months ago, when the first signs came along, no one wanted to believe it. They kept building.
When things finally did catch up? There was a ton of unsold inventory. Builders were caught pants down and started dumping at cost to shed liability. prices dropped, rates adjusted, Negative Ams came due...... and a whole bunch of tradesmen who refused to see the future............... were scrambling to stay busy. Prices dropped like a rock.
Why did they drop like a rock? Because all of the 80's had been a NEW construction boom. Becoming a subcontractor to new builders is about 1000% easier than becoming a contractor who deals with himeowners. And because it is, the field was flooded.
Those guys cut eachothers throats to keep a buck rolling in until the prices were down so far they couldn't pay their bills with what they earned. Then they all became "Home Depot Pros"
Since 2001 we've seen a NEW construction building boom. And we've seen tons of new subs spring up over the last few years.
Now that things are turning ugly, prices have already dropped for some trades. I talked to a friend of mine Sunday who was debating if maybe it was time to drop prices. He does mostly new work and his calander is empty and it's only August.
Prices will sink like a rock until they are so low that you lose money to do the job.
The only variable in play is the number of Immigrant workers. How many of them will just pack up and go home until things pick up again?
I know a few guys who framed at " The Hills" in Bedminster when things crashed last time. It took them from 1988 until about 2002 to get back to the SQFT price they were getting in 1987.
You may be right, of course. What I've seen in my little part of Monmouth County is primarily a boom in renovations of the houses that people are "flipping." That's dying, to some extent, but there are still lots of people out there trying to sell, and the realtors work hard to convince them that they have to have a state-of-the-art kitchen, bath, etc. to have a hope of selling the house.The guy across the street does renovs and add-ons, and things are still cooking for him. Another friend was lucky to get through the winter in the black. I just bailed into an office job, but I do get a few callbacks for weekend work.A few months ago, I spoke with a window installer for Lowes. He said they're doing about 1/3 the number of installs as last year, but prices have not come down. I think that's how it will go - work will dry up, prices will stay up, and some people won't get enough jobs coming in to survive. New construction is different area.George Patterson
But on 'Flip That House' they say I can make millions. LOL
The funny thing here is when things pick up is when the competitiion gets fierce. People quit their jobs at McDonalds and buy a hammer and help "sop" up the gravy.
Then the industry gets a bad name again.
Had a guy ask me three times was I qualified to install Hardi on his little house. He accepted my bid then turned it down.
He still dont have no Hardi installed as of last week.When everthing is going your way, you're in the wrong lane
New work and renovations are two different animals. New work is where most of the price slashing will come from.
This afternoon, I talked to my old partner. He does mostly new work installs thru a lumberyard. His work has fallen off and his prices took a big hit. He's Mostly in the Hunterdon/Warren county area.
The subs bidding cheap will be the guys who are hurting and are also bad businessmen.
They hope the cheap bid will be the job that keeps them going.
A banker should know those guys are going under anyway, and the more cheap jobs the sooner they sink.
Take your chances maybe, or keep one afloat who you know personally.
Maybe your wife is right, find the spec house that was way over your budget 6 months ago and make the offer you can afford.
There are houses sitting empty here that would go to a cash offer in a heartbeat.
Joe H
Around here the subs are charging less.
-Lou
As more homeowners default on loans, adding unexpected carrying costs to the banking industry, will lenders finally start charging less for the services offered?
I am looking to buy a home, but I don't want to pay any of the padding and garbage profit fees typically charged by the bank, and I want a much lower interest rate, like 4%....
Think any hungry bankers will bite?
I can't speak for Atlanta but I imagine supply and demand works pretty much everywhere. In southwest Florida prices are in the ditch. National builders rule here and they just aren't going to pay 2005 prices for 2007 work. The subs who are working on new construction here are the ones who lowered their prices.
In the early 80's I watched my dad struggle to get framing prices in the Tampa area up from .55 a Sqft to $1.10 a sqft.
Then when Texas crashed in the early-mid 80's and all of the crews flooded Florida.......... Back down to about .75 a sqft.
All of this funny money that's being pumped into the system is going to end up as price inflation. Price inflation leads to wage inflation, and more price inflation, etc., etc.
You might get some deals in the short run as the housing market bottoms out and excess inventory gets sold. After that I think we'll see much higher prices for everything. People living on fixed incomes are going to be hurting. Thanks Uncle Sam.
Remember that what you hear on the news about housing may or may not apply where you are. Around here it's really busy. In other areas it's pretty dead.
Subs might cut their prices a LITTLE. But it's not like their are huge margins to begin with, so don't expect big savings.
Every time I get a little slow, I use that time to re-evaluate my pricing. I almost always realize that I wasn't charging quite enough and change my prices to reflect that.
View Image
http://grantlogan.net/
"he ot the placed closed down whyyy thhhattt nnooo gooodddd" - sancho
same realization here here Grant-----------when things are slow--- i think i have a better chance of selling at a higher price as i have the time to make a good presentation---and that comes across well to the customer.
BTW------- new calls started this week--( this is following 5-6 inches of rain in the past day and a half)-----" HELP-- the storm chasers screwed up my roof and i don't know what to do--can you fix it???????"
My response?-------" I am sorry to hear that. I don't think I will be able to help you--- I have been blessed with so much work I am scheduling roofs for june 2008----and it sounds like you need your problem solved before that------"
stephen
no matter what you will get what you pay for!!
Of all the people to ever post on this discussion site, I truly hope that you, in particular, find the cheapest and hungriest subcontractor that ever lived.
You acting, and I do mean acting, as the primary contractor building your own house, I would think that your first thought would be to build a house for your family with the best quality workers available. I guess "quality" to your way of thinking is "the cheapest."
You ever watch those "Wa Mu" bank commercials?
During the building boon of 05 in southwest Florida our prices went through the roof. Like everyone else the subs raised their prices in response to high demand for their services. I'm talking about labor, not material which is another story. I built a spec house that I finished in early 2005. The plumbing sub charged me $5200.00 for the complete job. 6 months later I built exactly the same house again only the plumbing sub wanted $8000.00 for the same job. I'll do the math and point out that that was a $2800.00 increase in 6 months almost all of which was labor. Framing labor went from $2200.00 to $6600.00 in 6 months. Prices had little to do with costs or overhead but were based on high demand. Now these same subs are calling me crying because they have no work. I don't mean they have a little work, I mean they have none. You bet I expect lower prices and I get them. My A/C sub and my roofer didn't raise their prices and both of them are still busy.
I would have to say that i have never lived in an area where demand was so high I could charge waht I wanted. A lot of contractors here and I've been competing my entire career. Always been struggling to charge enough without outpricing myself."it aint the work I mind,
It's the feeling of falling further behind."Bozini Latini
If you're willing to use the guys who change their prices in order to stay entertained you're going to get exactly what you asked for. And deserved.
Real trucks dont have sparkplugs
To everyone who is chastising the OP for his question: Have we forgotten that contracting is a business pretty much just like everything other business out there?
Supply and demand are real forces that govern the way the market operates. Everyones know that when demand decreases and supply stays the same, a change in price will almost always result. The way to quantify how much the price changes is to look at the price elasticity of demand for a given product or service.
The banker in Atlanta is merely asking the forum if we think the pricing will remain fairly consistent with that of 12-24 months ago or if the prices will go down. Is he asking for hacks to bid on his job? Is he suggesting that he can steal bread from the mouths of his plumber's children? Nothing in his post indicates either of those to be the case.
Is it stupid to drop your prices in a downturn? Of course not. It's stupid to bid at a point lower than your costs to do a job (the ship is still sinking, just not as fast) but there a myriad ways to lower your prices and still remain solvent. Increasing efficiency, reducing overhead, increasing work hours, and other ways will allow you to decrease your prices without killing your business. They may not be inviting, but sometimes you have to do what you have to do.
Another point is that the banker is contemplating building a new home. If he builds himself, he will likely be putting several hundred thousand dollars in the hands subs in his area. If instead, he purchases a home in some builders inventory, he has not really provided any work for anyone since the builder is likely in the inventory reduction mode as opposed to rapid growth.
Jon Blakemore
RappahannockINC.com Fredericksburg, VA
I think whatever you do the ball is in your court.... buy a new spec house... and yes you can get a great deal... maybe below what it'd cost you to build it...
Yes you can expect to pay less if there are fewer jobs for the labor in your area... Had a contractor friend stop by my jobsite today... asked if his guys could do my painting... told me "I know i can't make a penny off you but at least i can keep my guys working" to be able to keep good help he has to keep them in work many times at the expense of him making anything...
around here i heard some hookers are even letting it go at cost
p
I'm sure you know that it's strictly local. I would be curious to know what the construction loan officers in your mortgage lending dept. have to say about their volume these days in custom homes. Or, if your own bank doesn't make that type of loan, what is the word around town? Because there's a clue as to your competition for subs.
And I mean real "custom" homes. Built one at a time. Not the ones by production builders, built by the gross, where you get to pick your colors.
although i was first offended by you Q on further thinking thats what 90 percent of builders do, But the Q should be how good a sub can you get for your own house not the cheapest
After reading all of these posts I wonder if their aren't two seperate arguments going on here.
The OP wants to build a NEW house. He wants to know if we think subs will be lowering their prices because of the downturn.
I think thats a regional question and it depends on where you live. In areas that have seen marginal growth over the last seven years, prices probably didn't climb that hard...............so they most likely won't fall very far.
On the other hand, areas that have seen huge growth and price climbs have most likely witnessed a huge increase in the number of new subs.
I know a guy set up to sell, deliver and install stairs and rails. he has a hard structure, several trucks, a shop and several employees.
he has gone from three to four sets a day to about one a day. 90% of his work is new construction.
So, do we believe he'll hold his price point and have no cash flow at all and risk losing his business? Or will he lower his prices and sell a little harder to try to keep things afloat?
I already know the answer to that.
Ran into an Excavator I know over the weekend. Hasn't run his machines in over a month. Right now he's trying to whore them out for day rates just to keep from digging into his personal savings for payments.
While I am not any longer, most of my friends are still selfemployed as subcontractors. Most focus on new work. Most have already dropped their prices.
But the big mistake is to confuse NEW construction with renovations and remodeling. A homeowner who has been in a house long enough to want a new kitchen or new windows or need a roof, has some equity(hopefully) and stability. They are improving where they live and are more easily influenced by sales method, percieved respectability and trustworthyness and are often less price driven.
Renovations and such are almost never as badly effected as new construction.
One variable exists. In some areas, like where my father lives, Paper GC's have picked up Hose-A and Hose-B and there crew of merry illegals for all but the finish portion of renovations and remodels. And have lowered their prices maybe 10%-15% but nearly doubled volume.
In a lot of places that were booming, new construction sub prices are already down. And that's what this guy wants to know. Question is........ Is Atlanta one of those places?
You do have some good points there. Traditionally remodeling and renovation actually does better in a downturn, because people who are afraid to move out and move up to a bigger house payment are willing to improve the value of what they have already.But I will disagree with a lot of the statements here like you expressed...
"So, do we believe he'll hold his price point and have no cash flow at all and risk losing his business? Or will he lower his prices and sell a little harder to try to keep things afloat? I already know the answer to that"I don't know that answer as clearly as you seem to, because I have known a LOT of contractors and subcontractors through several downturns. They let some bottom rung people go and diversify to find ways to keep the good ones busy, but they do not lower their prices to the customer - not the good ones. They know what their work is worth. Sometimes they take a cruise or go hunting in Alaska. or they build an addtion to their own home or a new shop building to keep people humping.But the only ones I have ever seen cut their prices were the hacks and cut-throats who maybe oughta not be in the business in the first place. And if they keep lowering their prices, thank God and Thor, they won't be for long.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Good post.
Remodeling Contractor just on the other side of the Glass City
But I will disagree with a lot of the statements here like you expressed..."So, do we believe he'll hold his price point and have no cash flow at all and risk losing his business? Or will he lower his prices and sell a little harder to try to keep things afloat?
Piffin,
That example is someone I know personally and i do know he has already lowered his prices. We had lunch the other day. He's not alone either.
The thing that a lot of people miss is that the hot markets ALWAYS get flooded with NEW subs. And they represent a huge cross section of the business. Some of them are solid bussinessmen who plan for the future and charge to cover overhead and reserve to make sure the business makes it. Others treat it like it's little more than a job with no more planning than it takes to get up and go to work in the morning ( Ironically, i know a few of those guys who have lasted more than 30 years and some guys who were awsome planners and business man who are already closing up).
And, the initial buy in is so low for some of the trades that going in and out of business is no big deal.
Combine that with all of the easy money and the guys in business a few years with new houses and big trucks and jet skis and 4 wheelers........... and a big slowdown like we are seeing here makes some people awfull nervous.
Now, those guys may not make it thru to the other side of this slowdown...........but they sure will drag prices down with them right up until they call it quits. Yeah, some guys with good reputations and well run businesses with the right clientel will hold the line. Those guys will be the exception not the rule. At least not in the areas that have seen big growth the last few years.
I've worked thru three slowdowns like this and I'm glad I don't have to worry about this one.
Now, those guys may not make it thru to the other side of this slowdown...........but they sure will drag prices down with them right up until they call it quits. Yeah, some guys with good reputations and well run businesses with the right clientel will hold the line. Those guys will be the exception not the rule. At least not in the areas that have seen big growth the last few years.
Robert, I think that paragraph says it all! And I dont care what part of the country one is in.
Doug
Clipped from the news today:
"The supply of unsold homes in the US rose to a 16-year high last month amid a crisis in the credit market, suggesting the worst is yet to come for the domestic housing market."
Those that proclaim that only the hacks are cutting their prices, and the "good guys" are either staying firm, or even raising theirs, are not in touch with the broader market.
"Good" GCs are doing everything they can to slash overhead and operating costs, and are "buying down" their "good" subs, and many of those "good subs" are complying.
Gene, I read the same or similiar article, you need to look a little harder, while I agree the housing market isn't all peaches and cream at the moment it's not all doom and gloom like the headlines make it out to be.
The article I read, which I can't find at the moment, said housing inventory was up .02% (two tenths of 1 percent) in aggragate. In the northwest and one other area housing stock was down, in the midwest and another area they were up.
There is also a larger market then just new housing for subs. All of our subs work a combination of residential remodel, new home construction, and commercial work.
Sub's that only work in one of the three markets could very well feel a big pinch, especially new housing, those that are diversified are probably going to be fine.
We work 95% residential remodel work and are as busy as ever while the new housing sector of our area is dead on it's feet.
CAG, the thread title does not say "new housing," but the OP made it clear that it was his interest to build new.
In some of the markets with which I am familiar, light and regular commercial is out of the question for most residential subs, as they lack the credentials, union and otherwise, to qualify.
While you, as one who concentrates on residential remodeling, are busy and need not lower prices, the same is not true in many markets where the slump is so severe it has everyone holding onto their wallet, wondering how far equity might slide.
While I am not in the game any longer, I stay in touch with some of my old colleagues in building products manufacture and distribution, who call on the wholesalers and dealers (read: lumberyards). The anecdotal info coming to me from them, from the entire eastern seaboard down through the Florida peninsula, and up through the midwestern rust belt, is that you can get foundation building, rough framing, some of the mechanical specialties, sheetrock hanging and finish, painting, roof installs, and other things for less than you had to pay a year ago.
That's not to say these aren't hacks bending over, but certainly there are some quality sub specialists who are making deals to pay the bills and keep their best folks working.
A lot of the dealing that is going on is likely kept tight to the vest, as no one wants it known they are lowering their rates. But it is happening, nonetheless.
Sad, but that is the market right now. Be glad you are in a good location, and in a good position in that location. Elsewhere, there is some weeping and gnashing of teeth going on.
good god, man ......the Sky is falling, and you... are blissfully unaware ....don't you remember 1991 ..??where do you think all these displaced workers are going to look for a next paycheck ..??residential remodeling, perchance ..??
In 1991 I was 14 so admittadly my experience is limited.
we've had a number of new home builders already try to break into the remodeling sector in my area. It started happening about 2 years ago here. Some have succedded in the transistion most have failed. It's to different of a ball game and most, in my opinion, do not realize the difference nor do they adjust before they flame out.
We're also some what fortunate to be close to Junction City Kansas which is having a huge boom as a result of the military bringing The Big Red One back to be stationed there. I'm personally waiting for the bottom to fall out of that one but for the time being it's occupied a number of people.
If anything it's been a boom to our business, for one it's put a number of workers out looking for employement, bad for them, but good for us. While most of the potential prospects haven't been what I've been looking for, there are more highly skilled and capable looking for work then in the past..
I see it as a weeding out period. I'm fortunate to be working for a company that has a long track record and solid base business to draw on.
To: AllThe definitive answer to all questions raised herein this thread is:Some will lower their prices, some will raise their prices and some will remain the same.In each of those three categories, some will diversify, some will specialize, and some will remain the same.In each of those nine categories, some will go broke, some will get rich, and some will remain the same.Each of those 18 things will happen in boom zones, crash zones, and those zones that remain the same.Now you know (|:>)Remember, you read it here first.LOLSamT
Edited 8/29/2007 7:08 am by SamT
Sam
Your a freaking genius!
Well said and very to the point so most of us dummies can comprehend.
Doug
Uuhhm...SamT
1991 is the year I went into this business here.While people around me were worrying about losing their jobs and some were cutting back on hours worked, and payments to some contractors were slowing down...I increased my income 40% that year by quitting my wage paying job and going into business.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Interesting blurb in the NAHB Remodeling News.
Myth The Remodeling Market Index (RMI), the remodeling industry’s main economic activity gauge, came out with second-quarter industry statistics Aug. 6 and showed that, contrary to popular belief, remodeling sales do not necessarily increase in times of lean new home building. The findings indicate a slight downtrend in remodeling activity consistent with current housing numbers, but also showing a promising upturn in aging in place home modifications.
For me, bathroom projects are up, kitchens way down, maintenace and repairs coming out of my ears, and a few addition leads.
Bowz
Excerpt from over at Wiki:
the U.S.'s largest mortgage lender Countrywide Financial to warn that a recovery in the housing sector is not expected to occur at least until 2009 because home prices are falling “almost like never before, with the exception of the Great Depression.â€[
And listen to this. In the 1830s in America, a real estate bubble happened, prices skyrocketed, everything went nuts for a few years, then the bubble burst.
It then took almost SEVENTY years for prices to reach the levels they had gone to in the bubble.
It's funny you say that about working on their own homes, etc. I've been so busy the past five years I've missed vacations and my house is going to hell. I'm finally finding time to work on the house and take some longer weekends. I'm not going crazy with spending and taking time off but I'm thankfull to have a little time finally."it aint the work I mind,
It's the feeling of falling further behind."Bozini Latini
I have had to re-read this three times thinking it was some kind of a joke.
You have built a few houses and have no idea what creates pricing?
Every one of my costs have gone up noticeably in the past year or two.
Some BIG builders may have some clout over "subs" and some margin to shave to keep things moving in some markets.
But overall,if there is any wiggle room, it ain't in the subcontractor's pocketbooks. It comes out of the builder's - YOU
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Taunton University of Knowledge FHB Campus at Breaktime.
where ...
Excellence is its own reward!
Pif, you live and operate your biz in a bubble of unusual wealth, where old whiteshoe money pays for expensive seacoast vacation homes. Much of your work is restoration or renovation, or adding to fine old homes with the materials and details done to match original.
A whole lotta cost in a piece of new work is labor, and you've no idea of the rumblings and shakings going on in Atlanta's huge housing market.
That same accusation has been leveled at me a dozen times or more since I've been posting here. Answer is still the same. I have lived and worked - mostly as a self-employed sub, in three different areas of this great country, for nearly twenty years before moving here, so my view is plenty broad and while I don't know the specific Atlanta market, I do know new construction and what kind of subs he will get if he pursues cutrate pricing.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Ditto.
Everytime I see a slow time, I get my sh1t together, raise my prices, and go do more work than I had before.Remodeling Contractor just on the other side of the Glass City
I am actually buiser now and charging more than I ever have, probley not do much this winter but thats the way the ball bounces,but I finally learned if I'm gonna starve to death I'll do it sitting on my couch.
You subbin' to GCs doing new builds, Dubya? If so, you are one of the fortunate few able to raise prices and be busier than ever.
But if that's not your biz, you are off topic here.
Brother Gene , yep that is what I mostly do. people for years where telling me I didn't charge enough, I reckon I just got luckylike you said --surprised the heck out of me !I
I think this is the most intelligent response I've read in this thread. Most of us "subs" are getting irritated because we know for the most part when things were good, the GC was making the most profit. We may have done a bit better but the differences have been marginal (at least in my area). Wiggle room has always been slim. Thank you Piffin"it aint the work I mind,
It's the feeling of falling further behind."Bozini Latini
I believe the numbers show that housing downturns lead more people to remodel their current houses rather than upgrading to a new one. Therefore, remodeling costs should increase as it becomes harder to find a people to perform the work.
I'm charging more than in the past to weed out bargain hunters. I've been doing this too long for too little to risk working for customers who want a "deal". I'd rather go work for someone else. I've got a good reputation and can readily find a job. Pay me what I'm worth or hire a hack and take your chances. hoever, I'll be glad to come in and fix the problems later and charge even more to do it.
Jason
"it aint the work I mind,
It's the feeling of falling further behind."
Bozini Latini
Atlanta 86
Others on this site might disagree with me since to many this is a serious matter and some are really suffering trying to make ends meet..
I've seen good contractors forced to work for nearly half what they were charging prior to the down turn. (and happy for the work)
their first bid won't reflect that but if you neogiate hard there really are some despirate people out there who are forced to work for whatever they can get..
Disagree with you? Oh no, I agree that it's possible to take advantage of someone in dire straights. I just think you're an anal orifice for proposing the OP do that so he could save a few dollars by screwing his fellow manBack a few months ago, you were getting pretty desperate yourself. What would you have thought of someone who went to your customers and told them that you were hurting for sales and they should negotiate your price down so you made no commision?
SamT
SamT
Sam no matter how much people liked me or respected what I did for them they couldn't buy another forklift to help me out.. Market conditions simply didn't allow them to do so.. I hung on as long as I could but now I'm out.. (just for information market conditions were so terrible that even if I sold equipment at my raw cost the real market was tens of thousands of dollars below that)
Holding out for the dollars you used to make won't put money in your pocket.. you must adapt to changing market conditions.. It's grim.. I hate it at least as much as you do but for some contractor who gets to build a house and maybe stave off the bank for a while he'll be greatful..
You don't get it? Do you?You told someone that it was cool to screw a contractor.I can't be any clearer than that.SamT
Edited 8/31/2007 1:41 am by SamT
SamT
Show me anyplace where I used the words you just used!
Screw a contractor? I said that contractors will take less than previous because of the market conditions. Contractors are always free to decline the job or bid at whatever number they feel fits their life style asperations..
I know that If I could have sold equipment for less than half of what I earned previously I sure would have.. In fact I would have sold equipment at a zero profit price simply to reduce the inventory my company was forced to carry..
That's right zero profit!
I live by commision and so I would have earned nothing for my efforts.. Yet I would have done so gladly. If the company had been able to stem the internal bleeding thru my efforts maybe they would have kept me on longer..
I don't know that but it's certainly worth the effort on my part..
Same with contractors.. some income would be better than sitting home watching the TV.
93700.65 their first bid won't reflect that but if you neogiate hard there really are some despirate people out there who are forced to work for whatever they can get..SamT
SamT
That doesn't say what you said does it? I'm not screwing the contractor am I? If the contractor doesn't need the work he won't accept the bid..
I was one of those untill last week..I would have sold equipment for dramatically less than previously.. I wouldn't like to make less but I would have accepted it rather than as I am now collecting unemployment benefits..
Right now, today I have three guys helping me out. two owned their own contracting companies and are thrilled to get the modest wages I offered..
I could have called more than 50 if I wanted them..
It pretty much translates to taking advantage of someone in a hard place to your benifit.
Don't bother with the Supply & Demand economics argument.
CAGIV
Look at the original posters premise..
Should he build a new house or should he buy one already built?
One more building is a good thing to the contractor who get's the bid..
That's not taking advantage of the person in a hard place.. That's offering a struggling contractor one more home to build at a time when building any home is getting more and more rare.
Your collecting unemployment? How can you do that if you were commission only?
.
Whale Oil Beef Hooked.
http://www.walkmoreeatless.com/
I dunno ...
but Frenchy loses his job and suddenly over 50 contractors are outta work.
wow.
almost sounds like bullsh!t.
Jeff Buck Construction
Artistry In Carpentry
Pittsburgh Pa
It's Frenchy. You are required to track down the proof for him.
.
Whale Oil Beef Hooked.
http://www.walkmoreeatless.com/
well ... right about now I figure they're all over at his place working!
Jeff Buck Construction
Artistry In Carpentry
Pittsburgh Pa
Jeff,
You are kinda backwards. I lost my job because more than 50 contractors were out of work.. In fact of the 375 customers I've had in the last 5 years I can count on two hands the number that are currantly building new homes.. The rest are either doing remodeling, or not working.. .
Don't sweat it, he'll be off it in 8 weeks, after the welfare guru's show him how to get back on his feet and he finds another gig.
Even though he's been bitchin about no pay for over a year, didn't go and find another job.
Sounds to me that he's entitled to a handout. ;)Remodeling Contractor just on the other side of the Glass City
No pay for a year and putting kids through college. He's a financial Guru. I'd like to see his dollar stretching machine.
.
Whale Oil Beef Hooked.
http://www.walkmoreeatless.com/
Gunner,
It's she-who-must-be-obeyed!
When things were great I wanted to spend spend spend..
She clamped down on my urges and now I'm glad she did..
two colleges, one wedding and a granddaughter.. (plus all bills are currant)
Good work.
.
Whale Oil Beef Hooked.
http://www.walkmoreeatless.com/
Years ago things were tough in a downturn, I could not buy a job yet people were working for material prices only, I went to the manager of the lumberyard and asked him if guys were getting lumber cheaper then me, He shook his head and said guys were doing jobs just robbing peter to pay paul for another month in biz. Plus they were in debt they had to produce anything, kinda like a slower suicide. There desperation affects everyone though, There always the guys with the brand new trucks.
JHOLE
I have 17 years in this industry.. I wanted to retire in it. I ran out the string as long as possible and now I have to change careers and start from scratch all over again..
I suppose in my position you'd quit just as soon as things get tough?
Well you won't make it in the sales field with that attitude..
Even though he's been bitchin about no pay for over a year, didn't go and find another job.
I Have to take another stab at this. Consider how long it took him to finaly figure out how to post pictures. He's not a man that jumps right into change:)
.
Whale Oil Beef Hooked.
http://www.walkmoreeatless.com/
True.Remodeling Contractor just on the other side of the Glass City
Anybody notice that the OP stopped reading this a LONG time ago? He even missed a couple of posts that were actually addressed to him. Wonder what he'll decide to do? Maybe he's out helping a depressed production builder by taking some pricey piece of trash off his hands at close to cost.Another day in the Days of Our Lives...
some day when things pick up again anyone wanting a deal will be put on ignore, The good subs will just keep there builders happy.
Gunner,
I was an employee. My earnings were based on what I sold.
"contractors forced to work for nearly half "How is it that somebody can be forced to work in this country? I thought the days of slavery were long gone! When is the last time somebody forced you to go out and make a sales commission?
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Piffin,
Please explain that to the contractor who did my neighbors garage for 1/2 of his orginal bid of last year. From last fall until this spring when he accepted the job.
He'd spent the whole time either watching TV or going out giving bids for jobs that he was tens of thousands high on..
If that was the only example I saw, I wouldn't be out of work today.. Instead I know contractor after contractor who wasn't even that lucky..
I watched guys who turned equipment in even when we told them they had enough equity to simply skip making payments for a year or more.. Guys who willingly gave up more than $30,000 worth of equity because they could no longer remain in the industry..
Sales in the 7 county metro area were 5.8% of listings and it's gone down dramatically since then..
"Please explain that to the contractor who did my neighbors garage for 1/2 of his orginal bid of last year."What do you want me to explain to him? I asked you a question.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Piffin,
Desperation causes people to do many things.. he accepted a 1/2 price deal rather than sit at home and watch TV.
Now since the bid was made at a time when work was plentyful he may have cut himself a fat hog and had that sort of margin to work with, or he may have figured out a way to do it much cheaper than originally figured..
I don't know.. I do know that in Minnesota only a handful of new homes are being built which has caused the remodeling market to be flooded by new home builders which is causing emodlers to have to slice a very thin deal in order to stay in business..
Right today I have three guys helping me.. Two own their own contracting company's. They are happy to work for (modest) wages and get some income rather than stay at home and twiddle their thumbs. I'm absolutely certain that it doesn't cover their overhead.. But I could have made the call yesterday to any one of 50 contractors that I know of and any of them would be here working!
"Contractors are always free to decline the job or bid at whatever number they feel fits their life style asperations.."So NOBODY forced them!I cannot possible build a garage for half my normal price. I would be losing money! If he is building a garage at half price just to be happy making modest wages, he was charging way too much to begin with.Or your story is full of holes.One or the other, I have no idea which.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
The days of slavery are not long gone.
The illegal immigrant issue is a prime example.
The skin may be a different color, no ships are used, and there are no slave auctions, but the end result is still similar- cheap labor for someone to use.
"Bills" force you to work. Unless you are an illegal, you must pay your own way.
Cheap is way different from slave. The illegal immigrants come here by choice because the work, pay and conditions here are BETTER than back home
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Yeah, I guess you are right.
The common thread is someone is being taken advantage of for someone elses financial gains.
So, how much longer will the legal American citizens be able to afford footing the bills that better the illegal immigrant lifestyle at the expense of the citizens???
Is anybody holding a gun to the heads of the illegal immigrants?If you listen to the liberals take, they (the immigrants) just want to come here to provide a better life for themselves or their families.So if they're coming here volitionally, how can you call it slavery?
Jon Blakemore RappahannockINC.com Fredericksburg, VA
just skimmed thru ...
long story short ... my take.
some will ...
some won't.
and Gene is pissed he's got an over priced house sitting somewhere.
or he can't beat down the subs on his next "hoped for" project.
Jeff
Buck Construction
Artistry In Carpentry
Pittsburgh Pa
Jeff, what did I do to you or say to you that would make you take a swipe at me like that?
I don't do houses, I have no houses, and I don't hire subs, nor am I looking at doing so.
I'm just collecting my social security and enjoying the b.s. here.
Here's my summary after all the discussion back and forth amongst ourselves:
You can tell your wife that the subs who will build a house of sufficient quality that it won't cost you in repairs down the road will NOT be cheaper in this market.
You can tell your wife that you cannot build a quality house, by GCing it yourself, for the same money as you can buy a piece of #### spec house. But that you CAN build a better quality house yourself for less money than a custom builder will charge you to build it.
You can stress that a better quality house saves you in: future repair bills, monthly utility bills(no small matter--but you better build a tight house), and that any additional cost gets partially subsidized by Uncle Sam if you have a mortgage and deduct the interest payments off your taxes.
You can find out what features she wants in a house that she can't find easily in a spec house. Stress that it's almost impossible to find a house that has ALL the features you guys want in one house--you have to build it yourself to get that.
Are you planning to stay there, or keep moving? Seems to me it'd be pretty stressful to a lady with lots of kids to have to keep packing up. If you build what you want, you can forego that.
So, that takes care of the wife. What about you? Can you convince yourself?
As the original poster, I should tell the Group what I've decided. Remember, my original question was whether to buy or build. I know this will sound like a no-decision, but I've decided to do neither.
Ultimately for me, I could never get comfortable with the spec homes for sale in our area - and I looked at lots of them. While there is money to be saved by buying, it's just more money now than it was before, and my conclusion is the same - I'd rather pay more for a high-quality custom home.
The question is how much more am I willing to pay? In Atlanta, the market for high-end custom homes remains very strong. I had three builders bid on my plans, and each wanted a fee of between 18% and 21%. I suppose it says something about the economy, but the top of the market is still going strong in Atlanta. Much of the postings (and my original question) had to do with the price of subs and as many have pointed out, that seems to be a mixed bag. Some subs are actually calling me, and I'm a wannabe builder, while other say they continue to be slammed. My conclusion is that I probably wouldn't save too much money on subs relative to recent prices, but I'd probably get more attention and have fewer scheduling problems.
The second issue for me is that I will have to sell my existing home to make the deal work. The market for existing homes, particularly ones like mine, is hurting. Existing home prices in my neighborhood have actually begun to go down. There's tons of inventory and I could expect a buyer to get their pound of flesh from me when I sell.
So, I'd be paying near the top of the market for a custom home, then take a beating on the sale of my current home. In the end I'd be getting hit from both ends and the timing just doesn't feel right. So, although I own a site and have completed the plans, I'm going to put the project in a holding pattern until things change.
In the immortal words of Geddy Lee of Rush:
"If you choose not to decide, you still have made a choice."
Thought about this thread and laughed out loud yesterday.
I was standing at the Verizon store eating a bagel and waiting for them to open. I noticed that the other guy standing there waiting got out of a truck with a pretty reputable local tile and marble companies name on it.
Seem his blackberry quite and he was going nuts about the calls he was missing.
While we waited we made small talk about the trades and some local builders. I asked how business was.
He said " New work is still around but not much of it and every builder I deal with feels like he has me by the ba!!s and is squeezing me for every dime" and " Every homeowner thinks that because new construction is slow I'm supposed to knock 50% off of every bid".
But, he's still busy!!!!!!
From over at the JLC forum, a Worcester, MA framing sub has this to say about current conditions:
"Believe me I know 5$ a sq. seems like nothing around Boston but that's what the going rate is around here,it's getting bad"
Just another piece of anecdotal evidence to toss into the stew.
Got back late last night from Naples, FL, where the market for new homes, except for the small slice at the very top end, is in total collapse. Heard that interior finish contractors can be signed on for 75 percent of '05 rates. Everyone is required to be state-licenced there.
Reading through this thread, it’s obvious that many of you take this very personally. It’s easy to see why. This is your income. These are the dollars that pay for your family’s wants and needs, and you want customers to respect that. It’s one thing to decline your bid, but it ticks you off when someone tries to leverage dollars out of your pocket.
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The customers feel pretty much the same way. Every extra dollar they pay you is a dollar that can’t pay for THEIR family’s wants and needs. And just like you, they get ticked off when they feel like contractors are leveraging dollars out of their pocket. Right or wrong, the perception is that some contractors have been doing just that.
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A couple of years ago – back when the building trades were booming – I participated in a discussion here about fair pricing. It was my contention that contractors should bid the job, and not bid the customer. I suggested that it was unfair to charge different prices for the same job, based on who was requesting the bid.
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I was politely, but thoroughly, disagreed with in that thread. The opposing arguments generally fell along two lines….
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1) I charge people I like (school teachers and elderly folks were mentioned) my best rate, most “normal†folks my regular rate, and people I don’t like (engineers) get an extra-high markup added in.
2) People in up-scale neighborhoods WANT to pay a higher rate. If you bid your normal rate, they won’t give you the job.
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I won’t rehash that argument, except to say that I’d be pretty ticked off if a contractor jacked up my bid because he didn’t like something about me or where I lived. I doubt that anyone here would appreciate being on the receiving end of that kind of treatment. It’s a simple “Golden Rule†kind of thing. In my mind, it’s unprofessional and disrespectful.
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Since that time, the market has shifted and some consumers feel like the leverage is in their favor now. What they do with that leverage is essentially the mirror image of that discussion we had 3 years ago. Some will try to take full advantage of the situation and some simply want the "school teacher" price.
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If you’re a guy that charges the same markup, regardless of the economic times or the customer you’re bidding to, then a customer’s haggling can be pretty insulting. Just as many have said here – your family needs to eat too.
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But, if you’re a guy that bumped up his margin when times were good, or when you were bidding to a certain type of customer in a certain type of neighborhood, then I don’t think you have much to complain about when the supply/demand balance shifts away from you.
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Essentially – if you respected your customer’s dollars when you had the opportunity to take advantage of the market, then you have every right to expect them to respect your income now. If you didn’t, then you don’t.
"Listen, strange women lying in ponds distributing swords is no basis for a system of government."Jon
I think thats an angle that I can agree with.
You don't want to rehash it ...
just want to get your point across one last time.
I see.
Jeff Buck Construction
Artistry In Carpentry
Pittsburgh Pa
Three years ago, I wrote dozens of paragraphs of (ineffective) argument to try to support my position. I haven’t repeated or reworded any of those arguments. There's no point in doing so.
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The one point I wish I had made then is a point that is also relevant to the current discussion – Try to see things from the other side of the fence.
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In the context of that old argument, that amounts to “How would you feel if you were singled out for a higher price?â€
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In the context of this discussion, it’s more like “Haggling customers aren’t necessarily trying to screw you over. They may be simply trying to negotiate out the padding that they believe (sometimes correctly) that contractors have added to their profits.â€
"Listen, strange women lying in ponds distributing swords is no basis for a system of government."Jon