Construction Slowdown Will Continue

Implications: The slowdown is just beginning.
It would be simply a guess to predict the future.
A soft landing is only a "maybe"


Analysis: As the article points out, even in the US' hottest market, builders are pulling in the reins, in an attempt to mitigate the impact of "investors" (i.e. speculators) pulling out of the market.  Short-term profits may lull us all into accepting the "soft-landing" scenario, but we are just beginning to witness the layoffs of builder and subcontractor employees.  What we will not see for a while is the loss of income and reduction in force of real estate agents, mortgage brokers, appraisers, home inspectors, and the entire base of people making their living in a very over saturated industry.

Just look at the numbers in a small market such as Bend, Oregon, and it is easy to project that a significant impact is yet to come.  As small, regional builders cut out $6M or $10M in spending, what is the impact?  Many construction workers have little savings, and the total loss of income throughout the country is, in my opinion, going to have more of an impact than many would like to think.  Finally, keep an eye on interest rates.  If they HAVE to go up, the picture will get worse. So, don't assume a soft landing is guaranteed--far from it.