SLIDESHOW

The housing slump is a drag on the U.S. economy.

The slowdown is spilling into the furniture, auto and home-improvement industries.

Furniture sales fell more than 8 percent in 2007 from a year ago. Sales of the Ford F-150, one of the most popular trucks used by contractors, decreased 13.2 percent last year.

Builders and subcontractors have scaled back on workloads.

Skilled tradesmen are the first to feel the effects. Landscapers, among the last, are braced for a slow spring season.

Electrical contractor Dick Humphrey ran 20 crews a day, each with an electrician and an apprentice. He is down to 12 crews now, doubling up on electricians and letting the helpers go.

"I had to lay off my first crews a year ago in February," said Humphrey, who owns Humphrey Electric Co. Inc. in Midlothian. "It was very tough.

"When I lay off a crew, that's two people who aren't paying taxes. They may or may not be drawing unemployment."

It's two tradesmen competing for work at other companies.

It's two people who probably aren't buying cars or furniture -- and who may not be taking their families out for pizza.

Restaurant operators point to the economy as their biggest challenge, according to the National Restaurant Association. Its monthly index, which tracks the health of and outlook for the industry, declined for the fourth consecutive month in December.

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"We're buying less material, fewer supplies," Humphrey said. "In the average house under construction, you have 200 workmen of various crafts. The slowdown trickles down to all of us."

The housing slump has caused a spillover, not a domino effect, said David H. Downs, director of The Kornblau Institute of real estate at Virginia Commonwealth University.

"This market is experiencing a tough, rough period -- there is no doubt about a correction, and the Richmond area is getting a mild dose of it," Downs said.

Other parts of the economy are doing well -- senior housing and health care, he said. Also, the downturn is creating opportunity. "The best and the brightest out there are looking at ways to capitalize."

The lesson here is that real estate is cyclical and central to the economy, he said.

"The public is becoming more aware of the truly key role that real estate as an employment sector and as an asset play in our economy. It is integral."

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The pull on the economy

The housing slowdown has knocked more than 1 percent off the overall economy, which crawled at 0.6 percent in the fourth quarter. Growth in the 3 percent to 3.5 percent range is considered healthy.

"Last year was the worst in the furniture industry since 1982," said furniture analyst Jerry Epperson with Mann, Armistead & Epperson, an investment-banking firm in Richmond.

"About 20 percent of all furniture sales typically are from moving from one house to another," Epperson said. With people staying in their houses, they are not buying as much furniture.

Industry shakeouts include the closing in late 2006 of Storehouse Furniture, which had 70 stores, including seven in Virginia.

Nationwide Mattress and Furniture Warehouse, which has a store here, is going out of business. Holladay House Furniture, which has a store on West Broad Street and one in Aylett, has filed for bankruptcy.

Lowe's Cos. Inc. and Home Depot Inc. reported sales at stores open at least a year fell 5.1 percent and 6.7 percent respectively last year.

In a slow housing market, fewer people need to put up shelves and curtains and do the home-improvement tinkering that comes with moving into a home.

The slump has extended to pickup trucks, the vehicle of choice for skilled tradesmen. "As new housing has plummeted, so have truck sales," said George Hoffer, an economics professor at VCU.

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How did the industry unravel?

Housing has been declining in the U.S. -- and the Richmond area -- since January 2006, said Christine Chmura of Chmura Economics & Analytics. She said she expects a recovery later this year or in early 2009.

The decline has been steeper and longer in other areas, such as the Washington area.

The housing industry started to recover last year, then the subprime crisis hit midyear, setting the industry back again, Chmura said. Borrowers defaulted on risky loans, credit dried up and even people with good credit had more trouble getting loans.

Housing is cyclical, so a cooling-off period was expected after a sharp, four-year run-up in home prices in the Richmond area. But this one had the added national twist of the subprime-mortgage crisis.

"It was the perfect storm," said Stephen T. Thacker, vice president and branch manager of SunTrust Mortgage Inc. in Richmond.

"Usually, it's one thing or another that causes a downturn -- inflation or interest rates," said Thacker, whose first loan in the mortgage business in 1981 had an interest rate of 19.5 percent.

Speculators got into the market big-time. Many lenders and borrowers acted as if house prices would continue to rise. And rating agencies seemed oblivious to the risk in mortgage-backed securities.

"We have seen subprime loans implode before, but it was always a small section of the market, and the market could shake it out quickly," Thacker said.

"Richmond in particular, but Virginia in general, is so much better than the rest of the country," he said. "Housing prices are stable here."

Tom Tyler, a senior analyst with Integra Realty Resources Inc. in Richmond, said the housing correction is expected to continue through the year. "So much depends on the overall economy," he said.

Contact Carol Hazard at (804) 775-8023 or chazard@timesdispatch.com.