The effects on a local economy from the attrition of home builders are large, said Elliot Eisenberg, the Washington, DC-based senior economist with the National Association of Home Builders.
EUGENE — The story isn't dramatic when one home builder after another goes idle. It doesn't make the front page or the top of the newscast like the momentous, 1,000- and 2,000-employee layoffs at Hynix last fall or Monaco Coach this winter.
But the effects on a local economy from the attrition of home builders are arguably larger, said Elliot Eisenberg, the Washington, D.C.-based senior economist with the National Association of Home Builders.
At peak construction pace in recent years, Lane County home builders finished about 1,500 houses per year and that sustained as many as 6,000 jobs while it lasted — more than the University of Oregon and more than PeaceHealth employ, Eisenberg said.
"When you build 1,500 homes, you are the largest employer in town, bigger than health care," he recently told a gathering sponsored by the Home Builders Association of Lane County.
Now the annual house production has plunged to about 400, and the loss of employment locally has been devastating, he said. "It's a two-thirds decline. You're losing tons of jobs."
Using an economic model that he created, Eisenberg estimates that every house creates four jobs though the first year of construction.
Two are the tradespeople working on site, one works in retailing or wholesaling building materials or as a member of the professional support team, such as a banker, land surveyor or architect.
The fourth works in either government, the general wholesale or retail trade or in health, education or social service sector. And the latter have no idea their job is dependent on new construction, Eisenberg said.
Eisenberg's model also predicts that each new house built supports one-half of a job ongoing, each year out into the future as new occupants live, shop and pay their taxes.
This is all part of the ripple effect of work that home construction stimulates as the money it generates circulates around and around in the community.
"I'm a builder. I go to a restaurant," Eisenberg said. "The restaurant buys wine from a local vineyard. The vineyard hires students from a local high school to pick the grapes. That's the ripple effect."
And it works in reverse, he said.
"When things are good it brings the ripple with it. And when it's bad, like now, not only do you suffer the loss of direct construction activity, you also lose the ripple effect. For every dollar you lose (in construction) you lose 50 cents in the ripple effect," he said. "It turns the fuel injector off. It magnifies the impact."
Eisenberg said he has witnessed the effect in Eugene.
"I walk downtown and this restaurant is closed, and that restaurant closed and that restaurant closed. I bet half the restaurant closures are due to this lack of money floating around. A lot of restaurateurs are gone," he said. "There's so many little tentacles here that we just don't think of."
Each new house brings along $191,220 of income to Lane County, including $27,940 in taxes and fees paid to local governments in the first year, according to Eisenberg's calculations.
In fact, new construction, he said, creates income and jobs for Oregonians and additional revenue for local governments, Eisenberg said. But he doesn't go so far as to recommend building houses to prime the economic pump.
But Eisenberg does suggest that local governments back off on the fees, taxes and systems development charges they levy on builders. This would lower house prices, stimulating demand and construction, he said.
Lane County saw 199 fewer homes built in 2008 than in 2007. Eisenberg's model predicts a job loss the first year of 796, a $38 million drop of income circulating in the community and $5.6 million in taxes and fees for local governments.
A snapshot of February housing starts shows a continuing decline in home building. Lane County builders applied for 13 single family home permits from local governments in February, compared with 49 in February 2008, a 73 percent decline.
"Another person in the economy loses a job," Eisenberg said. "It could be a hairdresser. It could be a waiter at a restaurant. It could be an auto mechanic — and they aren't even going to be aware of why they are laid off. They're just going to know their employer laid them off because the economy is not good."
Lane County faces a double jeopardy situation because local woods products companies that supply home builders nationally are in a slump. Wood products employment was down locally by 500 jobs in 2008.
The overall Lane County jobless rate was 11.9 percent in January, the most recent data available. The state rate, meanwhile, climbed to 10.8 percent in February while the national rate was 8.1 percent.
"Construction — both residential and commercial — has really carried our state's economy for many years. When we collapsed, the state's economy collapsed," said John Chandler, executive director of the Oregon Home Builders Association.
As bad as it is in Lane County, Eisenberg said, it's much worse in other parts of the country where home builders far overshot the market during the housing boom and demand is sharply down.
"You're about average. You really are dead average," Eisenberg said, "What's going to happen to you guys is you're going to be buffeted by the national trends. If the banking sector gets unwound and starts lending again, things will get better. If the banking system stays clogged up, the arteries are very tight and you will suffer along like everyone else."