Housing woes take toll on construction

LOS ANGELES — Robert Lindsey was not surprised by new data last week that showed new home sales have fallen more than 40 percent from their peak almost three years ago. He can tell from his company's bank account.

"We're literally losing money every month," said Lindsey, general manager of Signature Drywall Inc., in Sacramento, which installs drywall in new homes and apartments in the Sacramento and San Francisco areas.

In 2005, the firm raked in some $30 million in sales. Last year, sales were less than half that, and this year, Lindsey hopes he can make $8 million.

"It's kind of like bleeding to death," he said.

A lot of his competitors feel that way. On Monday, the Commerce Department said residential construction spending fell in April for the 26th month in a row.

The housing industry is not monolithic. Yes, there are major players, but for every mega-developer, there are hundreds if not thousands of smaller companies engaged in building houses. And when those companies are hurting, the pain — in the form of job losses and weak sales — spreads across an economy teetering on the edge of recession. California, Florida, Arizona and Nevada — which are all heavily dependent on the housing sector — are among the 11 states that have already fallen into recession, according to Moody's Economy.com.

"The collateral damage from a lost construction job is greater than in many other industries," said Mark Zandi, chief economist at Economy.com. "For every job lost in construction you generally lose a little over one more job elsewhere in the economy."

Like falling dominoes, when construction stops, the surrounding restaurants, grocery stories and other businesses get hit.

Guillermo Hermosillo's car dealership in Calexico, Calif., sold as many as 30 vehicles a month during the real estate boom. Many of them were pickup trucks bought by construction workers flush with cash from helping to erect new homes around the city east of San Diego along the U.S.-Mexico border.

"Then the housing (market) crashed, and everybody's losing their homes. These guys are left without jobs. You don't see them anymore," said Hermosillo, whose sales are half of what they were last year.

Head hunters say workers have fled California for Utah, Texas and other states where there's a better chance to get work in homebuilding.

But according to the University of Utah's Bureau of Business and Research, Utah is in the middle of its worst homebuilding stretch in almost 30 years.