California Dreaming ... or Nightmare?
October 31, 2008
When I took my first trip to California in 1982, the state’s sunny skies, palm trees and ocean views entranced me. With the Mamas and the Papas’ “California Dreaming” playing in my head, I understood why people were moving there in droves.
For many in the construction trades, California has indeed been a dream location. My employer, BNP Media, agrees. Out of 60 titles, we publish just one regional magazine, Reeves Journal: Plumbing-Heating-Cooling. Based in Laguna Hills, Calif., Reeves Journal covers California and 13 other Western states. It’s a great market.
Here are a few reasons why those construction pros love California:
- $1.7 trillion in gross domestic product
- 13% of the total U.S. gross national product
- 37 million residents – 12.5% of the U.S. total
- If California were a country, its economy would rank between the 7th and 11th largest*
California often leads the nation in building trends. Whether you work with high-tech equipment, luxury goods, green building products or common construction materials, California offers perhaps the most enticing opportunity of any state in the land.
Unfortunately, recent reports from California are causing some heartburn. Several cities are experiencing incredibly high foreclosure rates. Median home prices have dropped 34% from September 2007.** The “Governator,” Arnold Schwarzenegger, has indicated the state could run out of money by year’s end.
Has the California dream turned into a nightmare for construction pros?
No. Well, maybe yes for the short-term, but not for long.
The current market conditions are pretty bad, especially if your work is focused in one of the high-foreclosure rate areas. Banks are selling off empty properties at ridiculously low prices, discouraging new construction. And they probably won’t approve many home equity loans for remodeling or additions.
Yet there are many reasons to be optimistic if you can hold on during this downturn:
- Your weaker competitors may disappear, possibly for good.
- People continue to get married, have kids and move to new living quarters. Demand for your services is quietly growing.
- Home and business owners cannot ignore basic needs like leaky roofs, blocked drains, no heat, no AC, no water, unsafe floors, etc.
- The green building boom demands that inefficient or unhealthy building equipment/materials be replaced.
- California is fraught with natural disasters and wear and tear. Wildfires, mudslides and weather damage will continue to provide niche opportunities.
- Banks must lend money eventually or they will cease to exist.
- Californians are too ambitious and creative to remain in a slump for long.
Regarding the last point, Reeves Journal just completed its annual Western Construction and Economic Trends Study.*** While respondents indicated 2008 trends are indeed painful, many were optimistic about 2009 and beyond.
These contractors and wholesalers are focusing on government work, schools, hospitals and shopping malls. They are targeting older buildings that need remodeling, while promoting energy/water savings, green construction, gray water systems and solar energy.
Don’t work in California? No matter, the story is similar wherever you are. Nearly every market is experiencing a temporary downturn. But savvy pros are finding work.
Just remember the long-term trends spell great opportunity. Our nation’s population will continue to increase. Our housing stock, commercial buildings and infrastructure will continue to deteriorate. And aging boomers will continue to turn more DIY projects over to pros like you who will do the work better and faster.
* Wikipedia, en.Wikipedia.org/wiki/Economy_of_California
**Data Quick Info Systems, www.dqnews.com/california
***Reeves Journal has been the definitive source for industry news and happenings in the dynamic Western plumbing market since 1920. In January, Reeves Journal will release key results of its annual Western Trends survey at www.reevesjournal.com. Contact publisher Ellyn Fishman at ellyn@reevesjournal.