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Banner file photo/Sowers
Provincetown builder Peter Page saw a slow-down in his business this winter. |
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Builders feeling sting of real estate drop
By Pru Sowers
Banner Staff
The slump in real estate prices has spilled over into the Outer Cape construction industry, causing jobs to dry up and a jump in competition from up-Cape builders for local projects.
The result is that many local contractors are scrambling to maintain their work load and keep their crews employed. And prices are beginning to soften.
“In the last five or six years, it was a contractor’s market. We could pick and choose projects and set our own prices,” said Frank Deschaine, owner of Deschaine Construction out of Wellfleet and North Eastham. “Now it’s just the opposite. It’s a buyer’s market and contractors are dropping their prices.”
While many builders said they have seen an uptick in inquiries from potential customers this spring, they are still worried that the downturn in their industry, which began last fall, is not over. Continuing high prices for real estate, as well as worries about the war in Iraq and economic uncertainty, have had an effect even on Provincetown, which had weathered the construction downturn until recently because of the large number of people investing in real estate here.
Peter Page, owner of East Harbor Construction, operates out of Provincetown, where most of his projects are located. One of his regular clients, a real estate investor who purchased homes in Provincetown, renovated them and then put them back on the market, told Page he is no longer looking for properties to buy.
“I’ve been hearing for close to a year that things had been slowing down [in the Cape Cod construction industry]. But I didn’t see it in my business until this winter. I had work for the winter but the inquiries are down, which is future work. I’m crossing my fingers that some estimates I have out will come through,” Page said.
Leif Johnson, a custom home builder based in Wellfleet who has worked on projects stretching from Orleans to Provincetown for the past 48 years, said his business “is not as good as it was, that’s for sure.” Johnson has seen an increase in competition from up-Cape builders, who are traveling hundreds of miles round-trip in search of work.
“We’ve got a lot of competition. For me as a builder, for all these years in business and doing all the estimates, I’m not very successful lately in winning the jobs,” he said.
Individual tradesmen have been inundating Deschaine and Provincetown contractor John Lisbon with telephone calls asking for work because their regular employers have laid them off. Lisbon said he has received calls from masons, shingle installers and painters looking to join his crew.
Painters in particular are hurting, he said, because clients are looking to do some of the construction work themselves.
“They don’t want to spend $30,000 on a paint job. People are being a little bit tighter with a buck,” Lisbon said. “People are constantly asking me, ‘Is that your best price?’”
“I get three or four calls a week from shinglers, masons and painters. They’re all scared. I’ve had few of them say they’ve never seen it like this,” Deschaine added.
All the contractors interviewed cited the high cost of real estate as a primary reason for the downturn in their local industry. While the slowdown in home sales on the Outer Cape has yet to force prices down significantly, the 20 percent a year increase in value that property owners were used to seeing has virtually halted. As a result, Deschaine said, homeowners are unwilling or unable to take on any more debt in the form of an equity loan to make home renovations.
In the new home market, Art Hultin, owner of A.F. Hultin, a custom home builder in Truro, said other factors affecting a slump in business include the fact that most of the good land on the Outer Cape is already built on. As a result, much of his business involves tear-downs, where an existing house is demolished and a new one built in its place.
But the price of the tear-downs is still too high to encourage buyers to invest the sums needed for demolition and rebuilding, particularly in an environment where home prices are softening, Hultin said.
“Houses that are decrepit or that need remodeling are still viewed as being overpriced,” he said.
Hultin said that he is optimistic that the downturn in the construction industry may have bottomed out. While the dollar volume of his business has not been affected, the number of inquiries from potential clients, which was down 50 percent a year ago, is almost back to normal, he said.
Page said he, too, is optimistic about a turnaround in the market because he has begun to see an increase in the number of bank foreclosures on homes.
“If foreclosures start and [homes] go up for auction and sell for less, investors might be willing to get back into the market,” he said.
psowers@provincetownbanner.com
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Apr 19th, 2007