In 2008, we all know what happened. What not everyone—including me—understood at the time was how the massive pullback in spending would hit remodeling. Over many coffee chats with my colleagues, I determined that we would need to see three trends line up in order to know a true recovery was under way.
All three ultimately put people back to work, thus reducing the competition in my category. Why? My contention all along has been that when skilled hands are made idle, they turn to the grey economy and work as unlicensed contractors. That lowers the average price paid for renovation work and dilutes the available work across a larger labor pool. Much of the renovation work in 2009-11 included maintenance projects such as roof repair. Demand from homeowners shifted to "Have to do it” projects and away from “I’ve dreamt of this kitchen for years"-type work.
I started telling people to look at these three signs in 2009. Today, in my area, I think these trends are telling me that we’re finally into a recovery in my hometown of Portland, Ore. They also may be worth tracking in your area.
Trend 1: Banks have to start lending
The Dodd-Frank Wall Street Reform act of 2010 dictated higher capital requirements at all banks. As a result, overnight many banks stopped lending. I had a home equity line of credit through Chase Bank that was closed in 2009 (resulting, by the way, in a class action lawsuit that Chase settled and for which I got $35 in settlement for the damage to my credit score). Shortly thereafter, I was denied a business line of credit at a local bank. My ability to borrow for short-term business needs was greatly restricted for a few years.
Recently, that same small, local bank called and asked me to open a business line of credit. Seriously, they contacted me. The business banker even brought papers out to my jobsite explaining the loan terms. In this first meeting, at my questioning, he specifically admitted the bank had finally satisfied its Dodd-Frank capital requirements and was ready to start lending.
I’m also starting to have customers tell me during our initial meeting that they “already have financing in place." That's in contrast to the last several years, when often I heard that financing would be sought after a project was priced.
Trend 2: Road crews/commercial construction signal jobs
The various stimulus monies that were handed out by the federal government resulted in projects in my town such as deferred maintenance programs at a local university and paving a National Guard parking lot. My state spent (under Stimulus Act of 2009) $145 million, or $41 per resident. That's not much impact in the way of jobs, and what was created were only short-term jobs at that.
However, outside of the stimulus, current projects under way around me include a new bridge for mass transit, a major expansion of the Intel chip fab facility, and numerous high-rise multifamily buildings. All of these large projects put idle hands to work .
Trend 3: Renovation/building activity in other towns picks up
In my state of Oregon, Portland and surrounding cities contain more than half of the state population. That’s right: In a state of 3.5 million, about 2 million residents live within 25 miles of my house. While this is great for my line of work, it also meant that many laid-off workers from smaller towns moved here during the recession to take jobs. I met many workers from other areas during the recession. I knew that when they all found jobs back home, the reduction in the labor pool would help my business.
I’m seeing encouraging signs that all of these trends are moving in my direction, and have been consistently getting better for the past year. So I am declaring my personal recession over. This is going to be a great year.