A building boom Fed can't stop
A probable interest rate hike is not likely to curb demand for plumbers
After working long hours each day, contractor Mike MacDonald comes home to dozens of phone calls from frantic customers. It's gotten so bad that he finally took the lettering off his truck so people would stop knocking on the windshield. He doesn't need - or even want - new business.Skip to next paragraph
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"On a busy scale of one to 10, I'd say I'm a 15," says Mr. MacDonald, a heating and air-conditioning installer, over a hamburger at Ye Olde Cottage Restaurant in Weston, Mass.
MacDonald's tale could be repeated around the country. It's filet mignon times for the lunch-bucket brigade - the craftsmen who remodel houses, sweat pipes, or wire junction boxes. They are giving up vacations, missing the family dinner hour, and scheduling work years into the future. The long hours for MacDonald are symptomatic of the frenetic pace of the economy - a pace that Federal Reserve Chairman Alan Greenspan is expected to try to slow today by raising interest rates 0.25 percent.
"Maybe Greenspan tried to renovate his house," quips Dave Bush, president of the Associated Builders & Contractors Inc., a trade group in Arlington, Va.
Normally, any interest rate increase creates a lot of squawking on Capitol Hill. Labor leaders, business organizations, and trade groups crank out the press releases bemoaning the higher cost of money. But this time, many of the organizations are actually relieved to see rates rise.
"I suggest we might not want to make a lot of fuss right now," says David Seiders, chief economist for the National Association of Home Builders, who usually is one of the complainers.
The reason Mr. Seiders is keeping mum is that the housing industry, which employs many of the MacDonalds of the world, is hard-pressed to keep up with demand. Shortages of wallboard and insulation persist.
Because of tight supplies of labor and material, it now takes an extra month to build a house compared with two years ago.
"Suppliers and builders are struggling," says Seiders, who adds that "there are some pretty healthy increases in housing prices."
Why home prices are rising
Contributing to the rise in home prices is competition from the commercial sector. General contractor Henry Moseley of the Goldsborough Company in Tampa, Fla., says commercial firms pay more for labor and material. For example, 18 months ago, masons earned 65 to 67 cents a block. Now, it's more than $1 a block.
"They are able to draw out of our trade base," says Mr. Moseley.
But the labor shortages are even getting to some contractors who do commercial work. Mr. Bush, who is also president of Adena Corp. in Mansfield, Ohio, says he is actually turning down work.
Other companies are as well: The number of firms bidding against Adena to build new Wal-Marts is shrinking. "Everyone has a lot of work and it's hard to get workers," he says.
Contractors in residential markets are also getting increasingly selective. In Spartanburg, S.C., Parker Champion of Champion Construction says he has almost stopped building custom homes. Instead, he's concentrating on the "spec market."
"It's a lot easier just to build a house and sell it," he says.
Contractors are not just being selective but also brutally frank with customers. Back at Ye Olde Cottage in Weston, Mass., Ed Frothingham, an electrician, says he's telling people it could take up to "10 to 12 weeks" before he can get to a job.
Once the customers get the bad news, they hang up, says Mr. Frothingham, who is clocking close to 60 hours a week. "They hang up but then call back, saying they can't find anyone to do the work any faster."
Some tradesmen welcome the prospect of higher interest rates. Pete McGowan, a Boston area landscaper, says, "I could use a slowdown. I'm sick of working 150 hours a week."