Housing construction to get a boost

By: BRADLEY J. FIKES - Staff Writer
Economist: Rebuilding burned homes will cost $1.5B over two years | Monday, October 29, 2007 9:44 PM PDT ∞

NORTH COUNTY -- Homeowners rebuilding from last week's wildfire will have a plentiful supply of contractors bidding for their work, according to the state building industry's top economist.

Unlike the 2003 Cedar fire, when real estate and construction were booming locally, this year's wildfires came when construction is in a deep slump, said Alan Nevin, chief economist for the California Building Industry Association.

That drop in construction leaves a large labor force waiting for work, said Nevin, who is also director of economic research for San Diego-based MarketPointe Realty Advisors.

"We have plenty of people," Nevin said. "Because of the downturn in construction, (contractors) will have no problem getting subcontractors to work."

Nevin estimated that the rebuilding effort would cost roughly $1.5 billion just for destroyed homes. Rebuilding the homes will be unusually costly, he said. Most of them are in scattered locations and will have to be custom-built according to current building codes.

By contrast, San Diego County's gross regional product -- the sum of its goods and services -- was $150 billion in 2006, according to the San Diego Association of Governments, the regional planning agency.

In his back-of-the-envelope calculation, Nevin assumed that the average home destroyed was 3,000 square feet, and the average cost of replacement $350 per square foot. That comes to about $1 million a home for the roughly 1,500 homes destroyed, he said.

The stimulus won't be immediate, Nevin said. It will be spread over about two years as homes go through the process of design, approval and the actual construction.

"Normally, an architect would take three or four months, and then another couple of months for permitting and bidding out, and depending on the size of the building, it could take another six months to a year to build out the home," Nevin said.

The work won't fully make up for the overall decline in home construction.

Construction is a victim of the county's weakening real estate market, which has slammed all related industries. New-home sales in the county dropped to 325 in August, from 704 in August 2006, a decline of 53.8 percent, according to CBIA/Hanley Wood Market Intelligence. Of single-family homes, 90 were sold in August, down from 177 in August of last year, a fall of 49.2 percent.

As new-home sales have fallen, home building has fallen drastically. In 2004, 9,554 single-family building permits were pulled in San Diego County, according to the state building industry association. Last year, that number had fallen to 4,727.

"We'll probably wind up the year with 4,000 (single-family) units, give or take a few," Nevin said. "If they're going to have 1,500 permits pulled in 2008, it's a pretty significant number."

Skilled workers in such fields as cabinetry, granite and wood finishings will be in disproportionately high demand, Nevin said. However, that need can be met from Riverside County because construction there has fallen off by half this year over last.

"Because Las Vegas and Phoenix have had major cutbacks, you'll be able to import tradesman from there as well," Nevin said.

Waiting for work

From a large-scale view, prospects look good for contractors. However, Corey Maher, a licensed general contractor based in Escondido, says the benefits will take time to appear.

"The work is much needed, but it's not a way you want to get work," Maher said of the fire. "The people are still victims, they have a long road ahead of them. ... Before this happened, we had so much trouble getting building permits."

Maher said he hasn't seen an immediate rush of work. Insurance companies need time to assess the damage before anything is done with the property, he said.

"The people who started cleaning up and don't have their assessment done are shooting themselves in the foot," said Maher, who posted an ad on Craigslist on Monday morning. "They really need to get their insurance company out there, estimate the volume of trash and debris that needs to be hauled off."

Maher said the insurance companies appear to be working quickly.

"I noticed there were people working on the assessment yesterday, working on Sunday," Maher said. "They're definitely on it."

Frustrations

Benefits from the new work won't reach all companies at the same time, either.

Vista-based Knight Iron Works, which specializes in wrought ironwork and spiral staircases, will have an especially long wait. Owner Lewis Jacobs said the company is at the tail end of the construction business.

"Usually, the wrought iron people, if you're rebuilding, are the last ones in," Jacobs said."First, the slab guys get the work, then they got to frame it, then they got to wrap it, then they got to brown-coat it. And then we can take measurements, and when they finish coating it, we can put our iron in."

Jacobs said the company had been working in Rancho Bernardo and other fire-damaged areas before last week.

"We didn't do anything productive for about a week," Jacobs said. "They wouldn't let us in the area, the power's still down in some areas. We had four jobs at The Crosby (in Rancho Santa Fe), we had one in Bonsall, in Fallbrook, and one right on the border in Rancho Bernardo."

Reconstruction will bring more business eventually, he said.

Jacobs said he is going farther to take jobs until business in North County picks up.

Because of the damage caused by unlicensed and fraudulent contractors, legitimate licensed contractors often have to battle a seedy image, said Rex Wilson, owner of Carlsbad-based N. Rex Wilson Construction Inc.

Wilson, whose business is licensed, said he tried to pass out fliers for his company at the Rancho Bernardo recovery center and was refused.

"It's curious that they'll ban my people from going in there and providing assistance," Wilson said. "What's the main problem? They don't have structures. What do we do? We build structures.

"There seems to be a disconnect going on based on some prejudices about contractors," Wilson said. "The words 'unscrupulous' and 'contractor' seem to have become a synonymous phrase. What people don't realize is that unscrupulous characters pose as contractors."

-- Contact staff writer Bradley J. Fikes at (760) 739-6641 or bfikes@nctimes.com.