As the calendar turned to 2020, experts were debating when a recession would hit. Now, they’re trying to predict how bad the Coronavirus-caused recession is going to be, and how long it’s going to last. Most experts think it’s extremely bad, and it will probably last through 2021.
On the whole, recessions are bad for everybody. But, they do also present opportunities for some. There are products, services and business models that do better when everyone else does worse.
With that in mind, here are two types of painting customers who will struggle during this recession, and two who won’t.
Recession-Risky: Residential Homeowners
For the forty years before the financial crisis of 2007, home prices climbed, never dipping more than 5%, even during a recession. Buying a home was considered a guaranteed investment. It turns out that nothing is guaranteed – they collapsed in 2007, leaving many people owing more on their home than it was worth for the first time in modern history.
We could be facing the same “vicious cycle” of downward prices during this recession, too. People who owe more on their home than it is worth can’t move, because they can’t pay off their old mortgage. This reduces the number of buyers in the market, lowering home prices. As home prices fall, more and more people owe more than the home is worth.
None of this is good news for painting contractors. Most people who are trapped in a house don’t want to invest in it even if they can afford to do it. Although some may decide to “make the best of the situation” and try to upgrade the house. And nobody wants to invest in a house that’s dropping in value. As a result, fewer homeowners want to have their house painted when house prices go down.
Recession-Risky: Commercial Rental Real Estate
It’s too early to tell, but Coronavirus may create the worst commercial rental real estate market in modern history. A huge number of restaurants and stores are predicted to go bankrupt. On top of this, many businesses that do survive the economic shutdown will discover that their employees are just as productive when working from home. These business owners may allow these employees to continue working from home for years, reducing their need for office space. Instead of moving into larger offices when their leases expire, they may move into smaller spaces. We may have more commercial buildings than renters for years.
If this happens, owners of commercial real estate will not be able to pay their mortgages and will go bankrupt. Their properties will be tied up in bank auctions. It’s going to be years before many of these properties get any investment at all, including a new paint job.
Recession-Resistant: Single-Family Rental
One of the worst parts of the last recession was that many homeowners couldn’t pay their mortgages. The banks foreclosed on their homes and sold them at auction. In some cases, businesses picked them up at a large discount and rented them out.
Because many people can’t afford to buy a house in a downturn, rental homes are a good investment. Unlike the average homeowner, the businesses and people who buy these rental homes have plenty of money to invest in them, and they’ll be more than happy to pay for a paint job if it will increase the amount the house will rent for.
Recession-Resistant – Industrial & Manufacturing
In a normal recession, industrial and manufacturing businesses do poorly. People are buying less, so there’s less demand for their products. But this won’t be a normal recession.
We couldn’t do anything about the shortage of masks, gloves and medicines at the beginning of this crisis because we didn’t make many of those things in the United States. It was a wake-up call to our government that manufacturing nearly everything overseas is a national security issue.
Already our government is trying to grow US-based manufacturing. The government may choose to purchase American-made goods even if they’re far more expensive than those made in China. This will encourage companies to move their manufacturing to the United States – possibly leading to large growth in manufacturing, which would be especially helpful to rural areas. While earning painting contracts for these types of jobs will be much more complex, one contract will provide an enormous amount of work for the lucky contractors that secure the job.
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