How Do Home Sales Affect Your Contracting Business?

Starting a career in new home construction can be easy or difficult, depending on the timing. But even if you stay out of this part of the industry, the sale of homes (and property in general) can affect the kind of business you get and how much people are willing to pay. This guide identifies the construction fields that are often affected by the strength of the housing market, as well as a few tips to keep your business’s demand steady.

Interest Rates and Construction
In order to see how the housing market can affect construction, it’s important to understand how the economy influences both. When housing prices rise largely unchecked, as they did in the middle 2000s, the Federal Reserve may raise interest rates. This makes it harder for buyers to qualify for loans, and those who can won’t be able to buy as much. That slows the market, which can cause home values to plateau or even drop. This isn’t necessarily a bad thing if it happens in small increments, unlike the huge housing crisis of 2008. As a business owner, you should keep an eye on the strength of your target market. If prices are running high or starting to drop, you need to plan for a slowdown in business.

Indoor Renovations
When it’s a seller’s market, homeowners have a lot of potential buyers for any given property. This means that they are more likely to request renovations as a way to secure a higher offer, not to get someone in the door in the first place. People don’t feel so bad paying $20,000 or $30,000 for an upgrade to the kitchen if they think it will get them $50,000 when they sell a few months later. You can make this a reasonable transaction for you by verifying that your clients have the means to pay before you start the job. This way, when you come to collect payment at various stages of the project, you’re more likely to get it.

Landscaping and Exterior Renovations
Like kitchen and bathroom renovations, roofing is a field commonly affected by changes in home sales. Since this tends to be one of the most expensive home improvement projects, especially using materials like metal, homeowners tend to save it until they absolutely must get it done. You just want to make sure that they’re ready to pay when they ask you to take it on. If you’re in a luxury market like outdoor pools or exotic landscaping, it might also be worth picking up a few lower-end specialties. When values fall and homeowners have to pay cash, they often make less-expensive choices.

New Construction
Have you ever driven by a new development with a handful of half-finished houses just sitting there? There were quite a few of these about 10-15 years ago. When the housing market corrects, it can be harder for everyone to get funding, not just homebuyers. Developers faced with the prospect of no buyers may not want to invest another dime into completion.

If you’re subcontracting for a developer, it’s worth investigating how well they know the local market and how new home sales are doing generally. If the whole thing fails after construction begins, do you still get paid? The last thing you want is to sign onto a project with a bunch of buyers that fail to get loan approval, or do work that stops halfway through from lack of funding.

Commercial Developments
All of this can spill into commercial developments, as well. A development or revitalization of a city usually involves creation or renovation of shopping, dining and entertainment outlets. If people aren’t buying homes in a newly-developed area, there will be less demand for commercial spaces in the same region. Keep track of the market in any given area, and as you would for a residential developer, make sure the person hiring you for commercial construction is likely to pay.

A strong housing market can be a great time to work in construction. Knowing what to do when it isn’t helps you stay on the path during every season. To find the licensing program that meets your career goals, visit CSLS today!

 

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