As the slowdown in the housing market, combined with the ongoing credit crunch, continues to squeeze the economy, individuals who work in industries affiliated with housing are being forced to make adjustments to keep their businesses afloat.
Meanwhile, the trickle-down effect from the housing slowdown is affecting seemingly unrelated industry sectors such as automobile sales, which are feeling the pinch as consumers keep a tighter grip on their wallets.
Here’s how some of those businesses are dealing with the changes.
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When Kevin Lombardo bought American West Stair and Wood Products in 2005, he knew the Littleton-based business would not be able to sustain its volume if he didn’t make some changes.
And with 40 percent of his business coming from production homebuilders now weathering a downturn in the housing market, it turns out he was right.
With the exception of Denver, the number of building permits issued in the metro area during the first four months of the year plunged, and the nation’s largest homebuilders reported losses across the board during the second quarter.
MDC Holdings, parent of Richmond American homes, reported a net loss of $106.1 million in the second quarter, a sharp reversal from the $76.5 million it made in the second quarter of 2006. D.R. Horton lost $823.8 million during the quarter, Beazer Homes reported a $123 million loss, Pulte Homes lost $507.6 million, and Ryland Group shed $52.4 million.
But revenue at Lombardo’s company is steady, growing 8 percent to $2.5 million last year and remaining flat this year.
Lombardo managed to achieve those numbers by investing more effort in sales and marketing, building his client base so his Littleton company could ride out the storm. This year, he opened a new division for stair railings and custom doors in an effort to buoy revenue.
“It’s an area I believe is going to explode,” he said. “A lot of folks are not moving to the new homes.”
Other companies aren’t faring so well.
Scott Otten, construction manager for BMC Construction, estimates business at the Denver framing and trim company is off about 30 percent.
“We built 1,200 houses last year, and we’ll probably hit 800 this year if we’re lucky,” he said.
The company has about 30 full-time employees and hires laborers as they’re needed.
“We can’t guarantee people work because we don’t know what our volume is going to be month to month,” Otten said.
Year-over-year growth in construction employment in Colorado went negative in January and has stayed that way every month since, except for February. It is the worst run since the Colorado economy came out of the late-2001 to early-2004 technology and telecom slump.
Contractors are seeing a slight increase in activity as the large homebuilders try to make their year-end projections.
“But most of the feedback that I get is it’s going to be somewhat the same through 2008, with the same late-summer push,” said Tom Schiel, a partner and vice president at Rocky Mountain Drywall.
“Generally it drops off November and December. It’s generally a significant decrease.”
Business at Rocky Mountain Drywall has dropped 35 percent since 2005, when the company worked on 4,000 homes. But business is down only about 10 percent compared with 2006.
And while the company had to lay off about 50 of its workers in February, it’s hiring again – and having a tough time finding good employees.
“We’re trying to get some of the same people back, which is a challenge because they’ve gone and found work elsewhere,” Schiel said.
In March, Classic Doorways owner Aaron Linkow got stuck with about 40 doors and a couple of thousand feet of trim when one of his largest customers stopped building homes. It started the decline in the company’s residential business, forcing Linkow to examine his business model.
“They stopped building, so they stopped buying,” Linkow said. “I got stuck with inventory, and I don’t want to warehouse pallets and pallets of doors and trim. My warehouse space is much more useful moving stuff through.”
So Classic Doors went from selling doors, hardware and trim, to finishing, staining and painting.
“We picked up a lot of commercial contracts, and now we’re a completely different company from a year ago,” Linkow said.
Classic Doors now sells its services to its former competitors, and Linkow said its revenue has skyrocketed by as much as 200 percent.
“The fourth quarter is shaping up to be a record quarter for us,” he said.
Staff writer Margaret Jackson can be reached at 303-954-1473 or mjackson@denverpost.com.
