When Will Any Housing Recovery Reach Small Businesses and Contractors?

housing construction; Dean Terry via Flickr

Question: The housing downturn has affected not only large builders, but also small businesses and contractors that support and supply them. How long will any recovery take for these sort of businesses?

Paul Solman: I’m sort of a broken CD with regard to questions like these, forever repeating that there are two kinds of economists: those who don’t know the future and those who don’t know they don’t know. (I, of course, number myself among the former.)

That said yet again, you’d certainly think that recovery in the building trades, if left to the market, will take quite awhile. Years? Maybe.

It isn’t just a matter of too much housing out there, built for people who can’t afford it, though that seems to be true and is being exacerbated by the large number of people now moving in with each other, as well as less immigration. There’s also the natural swing of building, or I should say “OVERswing” — in both directions. When optimism pervades, it’s easy to get a loan to build. When the mood swings to pessimism, no one wants to give you money for construction. That reluctance to invest in turn delays the turnaround.

The countervailing force is the Obama administration and its stimulus package. If it is committed to building on a massive scale — new schools, say, or just retrofitting all of America for energy conservation or alternative energy generation — there could be building trades jobs aplenty. That’s the economic purpose of the stimulus: to effect a recovery.

Thanks to KETC/Channel 9 in St. Louis for collecting viewer questions.