Don’t worry, I do not mean to be alarmist. There’s no reason to be since we can already see signs that things are not going well!
Since February, I feel that something is not right. I had a wake-up call when I tried to sell my house, but without success. I noticed that entry-level homes were selling well, but “second buyer” homes had lost an average of 25% of their value. That made me wonder what was going on with the construction industry in general…
To better understand the situation, I asked friends and acquaintances in various fields and here is what they told me:
- There is a housing shortage, and it is not expected to get better soon. Indeed, rental properties have been selling at high prices in recent years because almost everyone believed that interest rates would remain low. That being said, the awakening is brutal when it comes to renewing the mortgage for those who bought at high prices. Indeed, as soon as the mortgage amount increases, the monthly payments increase by 25 to 30%, not to mention that with the new mortgage rates, the down payment is even higher and construction costs have not yet decreased. As a result, projects that were previously interesting are no longer affordable today.
- My acquaintances in the financial industry have told me that the awakening is also harsh for contractors who were used to having their projects financed are now being denied. The reality has completely changed.
- I would have thought that government contracts would have continued to be issued, but no… Bids still seem to be coming out, but I have heard that if the price of the lowest bidder is higher than the budget, the project is delayed. I have a feeling that the objective is to lower prices in the construction sector, but since it is a rather seasonal market, I believe that business will only resume in the fall or even next summer… The message that I understand from the public sector is: “We will be there to support the economy, but prices must go down.” In the meantime, we will have to “tighten our belts”.
- My contacts also anticipate a significant decrease in the commercial and industrial construction sectors, starting from mid-summer.
I cannot help but think that no one really knows where we are headed; it seems unprecedented. Some retirees who are not affected by interest rates and who continue to spend, a shortage of labor due to many retirements that have driven up wages and interest rates, the main lever against inflation, which affect certain sectors and certain individuals, but not everyone…
The table is set for a hot summer!!!
In any case, we will be there to offer you retreading and repair! Now is not the time to “throw away stuff that is still useable”!😊
Do not hesitate to contact us!
The LanOTR team