October 29, 2007

Industries tied to the housing market slow, let workers go

The valley's housing woes have triggered an employment collapse in some industries closely tied to the market, resulting in a string of cutbacks at companies that flourished during the boom years.

Mortgage companies and title insurance firms are closing branch offices and shedding employees by the dozens. Some real estate agents have walked away from the business. Others are hoping to weather the downturn and emerge as savvier professionals.

Construction firms are scrambling to find commercial or industrial work to offset the slowdown in residential building. General laborers who used to spend their days nailing together houses are shifting to other fields, some returning to the farm fields in which they worked before construction offered a better-paying alternative.

Since the start of the year, more than 40,000 workers nationwide have lost their jobs at mortgage lending institutions, according to data compiled by global outplacement firm Challenger, Gray & Christmas Inc.

Construction companies have announced nearly 20,000 job cuts this year, while the National Association of Realtors expects membership rolls to decline for the first time in a decade.

Title companies were dealt a serious blow when the market turned, said Terry Harwell, division president of Alliance Title Co. in Stanislaus County. Transactions at the firm have plummeted 40 percent a year for the past two years, forcing the company to lay off employees and scale back operations.

Harwell opened the first Alliance office in Modesto by himself in 2000. The company had swelled to 165 employees in 10 branch offices throughout the county by the real estate market's peak in the fall of 2005.

The downturn forced the company to reduce its staff by about 65 percent and shut three branch offices. The remaining 50 employees have taken a 10 percent pay cut. Though the company hasn't done away with employee incentives as have other title firms, Harwell is bracing for another tough year.

"We may end up with more consolidation and branch closures," he said. "The Realtors are doing the same thing, and lenders are closing offices and consolidating. Everybody is just trying to put themselves in a position to go forward in the next year and be in the black."

For real estate agents in par- ticular, he said, times are ex- tremely tough. "A lot are going hungry," Harwell said.

Less time rather than more

Oscar Dominguez, 41, was one of them. The former agent for PMZ Real Estate got into the business in 2005, after spending more than two decades working in retail sales.

Dominguez thought it would free up more time to spend with his family, but instead found himself racing around to houses on the weekends and putting in 60-hour weeks. Then the slowdown hit.

"My timing couldn't have been worse," said Dominguez, who sold two houses during his tenure and now is training to become an electrician at Modesto Junior College.

"It was tough. I was fortu- nate enough," Dominguez said. "There's some agents who didn't even sell two houses, like I did. Even established agents right now are struggling."

People joined the ranks of real estate agents in droves during the good years, hoping to snag a piece of the action when houses were practically selling themselves. The number of people with active real estate licenses in Stanislaus, San Joaquin and Merced counties nearly doubled from 2004 to 2006, jumping from 5,800 to 11,500.

They are leaving almost as quickly as they got in. This year, there are about 2,000 fewer agents with active licenses in the region than last.

Realtors are stymied by sellers who refuse to lower their prices, Dominguez said. Most people can't or won't accept less than what their house was valued at a few years ago, he said, meaning only the very best houses at the very lowest prices will sell. And those are few and far between.

"If you don't sell anything, you don't make anything. It is tough. You need quite a bit of luck and you have to be very, very aggressive and hustling all the time," Dominguez said.

"Just about all of my co- workers are struggling and will tell you it's a tough market," he said. "The buyers have all the strength. They can basically just name their price."

During the growth years, the mortgage or title industry offered well-paying jobs to people with limited experience or education but who had the right skills. These jobs often came with bonuses.

'It's something you fall into'

Melinda Costelli, an escrow officer for 31 years, lost her job in August after Fidelity National Title closed her branch office in Turlock, then transferred her to two other Modesto branches before closing those as well.

"Ninety-five percent of us do not have any type of degree. There are no degrees required for what we do. It's something you fall into. You don't grow up and say, 'I want to be an escrow officer.' But the income you earn in this business is far greater than a lot of positions that require degrees," said Costelli, 50.

She was unemployed for about three months before finding work at Stewart Title in Modesto. Though she is doing the same line of work, "you have to really work hard to get your business. It just doesn't walk in the door anymore," she said.

Mortgage companies that can afford to withstand the slowdown are cutting expenses, including some that have switched to commission-only operations. But many of the smaller mortgage firms have quietly closed shop, laying off a handful of employees each time.

"We are starting to see quite a few mortgage companies and a few construction firms that have folded," said Darlene Smith, the coordinator of the rapid response team for the Stanislaus Economic Development and Workforce Alliance. The team works with the state Employment Development Department whenever a firm lays off employees, making presentations to the displaced workers about unemployment insurance and job resources.

Closures sometimes unknown

The changes in the housing market happened so quickly that, in many cases, the rapid response team wouldn't hear about the closures until it was too late. "So many are closing and as a team, we are not always able to find out," Smith said.

The construction industry, meanwhile, is suffering from setbacks. Roughly 2,000 construction jobs have been cut in the last two years in San Joaquin, Stanislaus and Merced counties, according to EDD figures.

The squeeze in the construction industry is being felt all around, including the highly skilled trades, said Billy Powell of the International Brotherhood of Electrical Workers Local 684 in Modesto. "Right now, this is our slowest period for the IBEW in the last 10 years," he said.

Work was "going like crazy" last year, he said. Then projects began to dry up around January. "There are fewer jobs and some of our contractors were finishing up projects and sending electricians back to the hall," Powell said.

And it isn't just union workers. "I see a lot of nonunion workers, too. It is affecting both. There are a lot of them looking to go to work," Powell said.

Florsheim Homes has post- poned its Rose Way subdivision in Modesto indefinitely, and Pa- cific Pride Communities stopped construction at its Thomas Ter- race development in Modesto while it renegotiates with lend- ers.

Others are doing the same.

"We represent several builders. They have nearly stopped production. What we are selling is current product," said Larry Matos, who started Century 21 M&M and Associates with John Melo in 1994.

That has forced some construction firms to refocus their work, concentrating less on residential building and more on industrial or commercial projects.

Construction job peak in 2005

Construction jobs in Stanislaus County jumped from about 11,000 in 2001 to a peak of about 14,000 in 2005 during the housing boom, according to the EDD. Since then, the numbers have fluctuated, dropping as low as 12,000 in February to more than 13,000 this summer.

"There have been some increases and decreases and now it is edging up slightly. The demand that is sustaining it is on the industrial side, rather than residential," said Liz Baker, EDD labor market analyst for Stanislaus and San Joaquin counties.

"Commercial construction has done pretty well. It has picked up some slack. If you are an electrician or plumber, you may not get as many residential jobs but might be able to work on a light commercial project like strip malls," said Bernard Markstein, a senior economist at the Na-tional Association of Home Builders, a Washington D.C.- based industry group.

"Certainly a lot of people are hurting, but there is some flexibility here."

Those who can, shift jobs

Those who have the ability to shift into different types of construction jobs are doing so, Markstein said. The exception is general laborers, he said, many of whom toiled in the agriculture fields before leaving for better-paying work in construction a few years ago.

"They follow the labor trends and certainly the construction thing has really slowed down more than anyone thought, and there were available jobs in agriculture," said Wayne Zipser, executive manager of the Stanislaus County Farm Bureau. "It is noticeable."

Farmers in the Northern San Joaquin Valley who feared a worker shortage for this year's harvest said they were surprised when they had a full labor pool to draw from.

"The problem should have been worse this year because there were large harvests. We should have had a major labor shortage this summer, but it didn't materialize," said Vito Chiesa, a Hughson-area peach grower.

He attributes it to the slowdown in the housing market. Had the construction industry remained strong, he said, farmers probably would have not been able to harvest all their crops. "We skated by this year," Chiesa said.

Despite the turmoil at many of the companies that serve the housing market, Stanislaus County's unemployment rate has remained relatively stable at around 8 percent to 9 percent this year.

That could be because some employers are in a holding pattern until the market bounces back, Baker said.

Or those who were laid off were able to quickly find similar jobs, she said, such as the construction workers switching to transportation positions or former loan officers who are now processing car loans.

"Jobs are out there," Baker said. "It just may not be in the same industry."

Bee staff writer Christina Salerno can be reached at csalerno@modbee.com or 238-4574.

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