The housing depression, which first hit hard at small builders across the country, has now begun to affect the operations of even the largest companies, industry spokesmen acknowledged this week.
Small firms have been going out of business at rapid rates because of the length and depth of the current housing slump. And Michael Sumichrast, chief economist at the National Association of Home Builders, estimates that, industry-wide, nearly half of all builders have either shut down completely or curtailed their operations to almost nothing.
The country's largest builder of single-family houses, U.S. Home Corp., has had to take extraordinary measures to cope with dampened sales.
In July the corporation announced it was selling off assets and laying off employes as cost-cutting measures. A spokesman at the company's Houston headquarters said that in the third quarter, the firm's employes were reduced by 646, or 20 percent, and a number of subcontractors were dropped in actions involving 6,400 individuals. Even so, the company says it expects to take a loss in the fourth quarter.
Ryan Homes, another major builder, also has had to "keep a lid on staff and cut back somewhat -- though not wholesale -- on some of its operations," said David Dragics, director of investor relations for Ryan. A year ago Ryan had 1,650 full-time active employes, and this figure now is down to 1,500, Dragics said.
Locally, one cost-cutting measure at Ryan put 31 persons out of jobs in Thurmont, Md. A manufacturing plant there was opened just last July, but in October the company was forced to close the plant because there was "not enough volume to sustain" the operation, Dragics said.
These kinds of cut-backs have contributed to unemployment rates that have reached 18 percent in the construction industry, or about 912,000 persons out of jobs, according to the home builders' association. But the group also estimates that another 200,000 self-employed persons, who do not show up on official unemployment figures, also have ended building activities.
U.S. Home has taken a number of costly actions to help it sell its homes during times of exorbitant mortgage interest rates. The company's third-quarter report shows the firm is spending almost 9 percent of the selling price of its homes to "buy down" interest rates for potential buyers, compared with 6.65 percent in 1980 and 3.67 percent in 1979.
Similarly, Ryan Homes is absorbing between 6 and 8 percent of its home sales price in buy-downs, according to a recent analysis by Dean Witter Reynolds Inc., and is "still having substantial difficulty in obtaining firm orders with monthly payments that customers can afford."
Dean Witter notes that Ryan's slack sales have continued despite a fall sales contest from September through this month in which the firm is offering up to $ 4,000 discounts to customers who do some of their own interior painting and finishing work.
U.S. Home also is trying another unusual sales tactic in an effort to rid itself of excess inventory by auctioning off 100 of its homes across the country. It said it would require no minimum bid but would take the highest offer it receives, no matter how low.
The homebuilders point out that inventories are high across the country, preventing a fast recovery in the industry.