Dr-Fix-It! Notebook Archive:
Building Boom . . .
In contrast to the overall building downturn in 2006 , a few key economic indicators edged upward in January 2007. New housing starts, existing home sales, as well as a residential and commercial building permits were all up. Not a lot, mind you, but enough to make Wall Street analysts wonder if the recent construction downturn has finally reached bottom. Further fueling optimistic speculation, jobs and employment figures also notched upward, ever so slightly.
"Well, we are out of here", said Kevin - the plaster crew foremen - as he took off his knee guards and tossed them in to the back of the pickup truck. "We will finish out the rest of the day by taking down the scaffolding and picking up some garbage. But, that's it. We're done here."
"Where are you going next?" I asked.
Kevin leaned against the side of the pickup truck and crossed his arms on the top of the side wall. He played with the tie-down ring. "Aw, We don't have anything going. Nothing out there at all. Me and my cousin Jeff - he's a plasterer too - we're going up to the river 'n fish. We got one of them little house trailers over there so's we can live pretty cheap. We jus' hole up there. Don't spend no money hardly at all. Our company usually keeps us busy, but we got no work. Nothing at all. They said for us to call in to the Shop every Thursday to see if we got any work. But, I don't think we'll be working steady again until spring."
Are you going to be OK ?" I asked Kevin.
"You kidding? Me and Jeff - We work when there's work. When there's no work, we fish. Jus' Think. Six weeks of nothing but fishing. Yep, we'll be very, very okay."
I shook Kevin's hand, then Jeff's. "Well, have fun" , I said, "I'll see you around."
"Right, Doc. We'll see you around" ( It seems like nobody ever says 'good-bye' in the construction business. )
A little later my cell phone chirped. It was Mark the Stockbroker. "Doc, It is time to buy stock in copper. The construction downturn is over. Demand for copper is going to skyrocket! We are rating copper a strong buy!"
The statement made me smile. "Mark, This conversation strikes me as a little upside down . . ."
"What do you mean, Doc?"
"Well, you are sitting in some plush office on the 33rd floor of a giant glass tower over in the big city . . . "
"Actually, Doc, I'm on the 36th floor."
"36th floor. Right. And I'm standing in the middle of a hotel under construction. Drywall dust in the air . . . Steel toe boots . . .hard hat . . .blue prints under my arm . . .talking to you on a cell phone trying to hear over the noise of a chop saw."
"I know what you do, Doc. It's all here in your account profile."
"Well, Okay then!", I complied to move the conversation along, " Tell me ALL ABOUT the construction business!"
Mark gushed, "It's all good news. Starts are up. Resales are up. Building permits are up. Unemployment down. Pardon the pun, Doc, but now is the time to get in on the ground floor!"
"I don't know, Mark. I think I can describe what happened in just two words."
"Construction Boom? Downturn Over?" Mark guessed.
"Warm December", I replied. "TV news broadcasts were showing cherry blossoms in Washington a week before Christmas. There was very mild weather all across the north and east during December. People in the business were simply using the favorable weather to do some things they were planning on doing a little later in the spring. I think what you call an upturn might only be a weather-related tick."
"That is your problem, Doc, you are too close to it. You can't see the forest because of all trees in your way! I'm telling you, we are the cusp of the next great building boom!"
"I don't think so, Mark. I am really worried. 2007 is the year that a huge number of those adjustable rate mortgages start to reset. ARM's that were sold in 2001 and 2002 with five-year interest reset clauses are now coming due. And, banks were writing home equity loans that left houses financed to 100% or 125% of the value. So, with property values dropping, mortgage foreclosures are increasing at an exponential rate. If the default rate gets out of hand, the banking industry will be in jeopardy. Taxpayers might be left holding the bag just like the Savings and Loan crash. All of this funny money and easy credit has every market overvalued. Not just the real estate market - every market - even your copper market."
"Aw, Doc!", Mark interrupted, "You are depressing me. I didn't know you were one of those doom and gloom types! I call you with the best news of the week and all you can do is worry!"
"Yep. It reminds me of the 80's. Deja vu - The Savings and Loan crash all over again. This time its the banks, though. Banks might get stuck with a lot of phony equity this year. It might get pretty ugly."
"And that is why . . ." Mark crowed, " . . .you need to take my advice and get into copper this instant. I have a GREAT deal for you! But, you have to hurry!"
"Kevin and Jeff went up to the river to do a little fishing. But, I wonder if they will be up there longer than they think . . ."
Mark replied with a string of confused queries, "What do you mean - 'up the river' ? . . . Who are Kevin and Jeff? . . . Helloooo Doc!. . . You There? . . . Am I missing something? This copper thing is a great deal, Doc. Do you want in?"
"Not now, Mark. I'm going to wait and see if things look any differently come spring. Maybe in April, I'll have a better picture of the future. It doesn't look like a boom right now. One 'up-tick' does not mean a 'boom' to me."
Mark was mumbling now. " I swear, Doc. Sometimes I think you are on a different planet. Savings and Loans? Rivers? Fishing?. . . OK, I'll call you again in April. But, don't say I didn't tell you so: This is one hellova investment opportunity! You are missing a chance to make some serious money!"
"Thanks, Mark. I'll pass for now. I want to wait and see."
"Doc, somebody once said something like: 'a person who lives in the past can't see the future'."
"Well somebody else said that if you ignore the past, you're doomed to repeat it . . . Thanks for the call, Mark. It's 'NO' for now. . . But, give me a call a little later in the spring."
"Haven't you heard?", Mark persisted," I don't take 'NO' for an answer!"
I pushed to finish the conversation. "Well, I gotta get going here, Mark. "I'll see you around."
"Ok, Doc. Good bye."