Economic Forecast and Strategies for Building Suppliers: Summer 2006
Summary: What to do about the long-predicted slowdown that has arrived in the housing market
As the representative of dozens of national and regional building suppliers, the law firm of Levy • von Beck & Associates pays close attention to the economic outlook for the construction industry as a whole, and to the building supplier market in particular. So, where is the industry headed? Let’s start with a few observations:
If homebuyers continue to defer their purchases, prices will fall. And, if big industrial states continue to lose high paying manufacturing jobs, as is occurring in Michigan, there will be a spillover effect to surrounding states. Spec vacation house builders will take the biggest hit, depressing the market around them.
So, how does this impact building suppliers? We expect to see increases in:
And as they enter the market and compete for work they have ignored for years, they will inevitably drive down margins. Further, some will prove their incompetence at handling commercial work by underestimating costs, and then by failing to complete jobs they start.
Contractors will have to cut their margins to stay alive.
Examine your customer accounts and your credit policies. Look at your accounts receivable and examine any account in the sixty day column. Remember that an account sixty days past due has less than a 50% likelihood of paying. Can you afford to lose those accounts receivable?
What can you do?
Maybe we will experience a soft landing, as some economists predict. Regardless, you can help yourself by tightening up now, watching your receivables, and filing liens when in doubt. If you have any concerns, call us to discuss the situation.
LEVY • VON BECK & ASSOCIATES, P. S.
ATTORNEYS AT LAW
600 University Street, Suite 3300
Seattle, WA 98101
(206) 626-5444 - Fax: (206) 382-5527