Monday, Oct. 29, 2007

As spending shrinks, businesses make do

Fewer people are calling the region's Handyman Connection for home repairs.

Boats are not selling as quickly at Bob's Marine in Modesto.

And the demand for real estate appraisals has fallen off.

For these businesses and many others, the dramatic real estate decline is cutting into their bottom line as people cut back on discretionary spending and companies slash expenses.

"It's affecting every type of business, across the board," said Sky Ucci, owner of Modesto Handyman Connection, the region's outlet for a nationwide chain of handyman service franchises.

Ucci said retail business owners of all kinds have told him they're hurting, and many attribute it to the Northern San Joaquin Valley's real estate slump.

Housing is tied to consumer spending in a number of ways. Someone buying or selling a home likely will use a real estate agent, mortgage lender, title company and appraiser.

New homeowners are more likely to spend money on pool construction, landscaping, furnishings and such.

If they've been in their homes for a while, they may undertake repairs or remodeling projects.

Economists have noted that during the housing boom, many people were refinancing their mortgages to pull out equity, then using it to buy cars, boats, home electronics and other "toys," even pay for vacations.

The slump hasn't spared big-name retailers. In an earnings report earlier this year, Home Depot attributed a drop in sales to the real estate slowdown, noting that builders, contractors and homeowners were buying fewer products.

A May report by the Congressional Budget Office suggested that consumer spending would slow nationwide if home prices dropped, which they did last month.

"Losses would also be larger if lower home prices had adverse effects on the volume of home improvements or on the finan- cial situation of heavily in- debted homeowners," the report stated, outlining a scenario many business owners believe is playing out in the valley.

Some are sticking it out

Businesses that saw the slowdown first, and perhaps felt it the most, are those directly tied to real estate.

Home appraiser Dan Epperson, of Epperson Appraisal Services, said he and his wife, a loan agent, are getting far fewer phone calls for their services.

"During the boom, I was so busy that I was having to turn away work. I was able to pick and choose," said Epperson, 49. "The slow turnover means that there are less sales, and that means less appraisals for me."

Epperson said he and his wife used to go out for a nice dinner a few times a week. Now they go once a month.

"I know other appraisers are dropping out of the industry," he said. "I'm one of the ones that's going to stick it out."

Other businesses are hopeful but said they don't know how long the slump will last.

Marla Giddings, who shoots virtual home tour photos in the valley for CirclePix, said she hopes 2008 will be better than 2007.

She said orders have slowed by nearly half from two years ago, so she's adjusted her schedule and pondered doing shoots for commercial buildings.

"The good side is I can do it all in one area on the same day," said Giddings, 49, who lives in Escalon. "But I'm having to pound the pavement."

Other business owners in real estate-related businesses have experienced a notable slump, too -- or worse.

In Turlock and elsewhere in the state in the past two years, there are stories of pool building contractors who went under, leaving scores of jobs unfinished.

Experts said those businesses prospered when real estate was hot but ran into problems when demand dropped.