Enjoy and I apologize in advance
It’s 2:30 am on Thursday 9/22/2022.
My 2 kids are asleep and I can’t sleep, which leads me to the current topic “How does the recession affect my upcoming roofing system?” I assure you, I rather finish my current book Automatic Habits by James Clear or catch up on a show other than a Pixar, Disney movie. Yet, here I am thinking about roofing, which leads me to believe is the topic worth writing about?
Whether this gets read or not, I’ve concluded it’s for my own sanity. Maybe it changes one thing or prepares you for the future roofing system you need? The last few years have been exhausting across the world whether that be politically, fiscally, or you fill in the ____________ at this point. My stance of late is I’m desiring to be an optimist, so this is not a “the sky is falling; the sky is falling” about the current economy……...but the sky is falling whether the media, roofing manufacturers, and maybe your roof will be soon around the same time.
Back to the initial topic “How does a recession affect the future of my roofing system.” First and foremost, I’m not an economist, but my current experience is planning a home build and my day to day job of solving roofing issues for homeowners. I had a recent encounter with a condominium board whom replied “how do you expect us to pay this (referring to their insurance deductible – the amount in which they the board elected to pay), which may have indirectly spearheaded this journaling process. So, if this overtyped, non-caffeinated article leaves you high and dry, well so be it, at least you received a book recommendation that may eliminate your guilty habit such as “reading time wasting articles on LinkedIn, etc.”
So, first let’s review a few definition’s and inspect my recession litmus test. I do want to reiterate I have kids, start actual work in a few hours, and they’ll be no grade on this paper other than maybe my grandma hitting the “like” button on social media (not saying she’ll read it). If you wish to dive further, please do so.
Recession Litmus Test:
1. Definition of Recession
2. Fancy Chart
3. Definition of Bull Market
4. Definition of Bear Market
Phillip Cooper Recession Litmus Test
First: The definition of “Recession” by Google (as of Sept 22 at 3:12 am)
“A period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters”
Second: Now let’s look a pretty chart by “big brother”
Let’s keep in mind that the whole Q2 20’ to Q4 21 are surely associated to that whole pandemic thing. Real life events would be - economic shut down (Q2 20’) and then insert of “funny money/stimulus aid/paper printing” to band aid the inevitable. (Q3 20’) or the Bureau of Economic Analysis graph interns need to step it up.
2022 – Q1 and Q2 both below the Real GDP growth indicators.
Graph from Bureau of Economic Analysis - https://www.bea.gov/news/2022/gross-domestic-product-second-quarter-2022-advance-estimate
(I apologize the chart won't attach, but the link works!!!!)
Third: The definition of “Bull Market” by Google (as of Sept 22 at 3:48 am)
“a market in which share prices are rising, encouraging buying.”
Recent context: The United States recently experienced a Bull Market run from 2008 (Post – US Financial Crisis) to 2019 (Covid- Pandemic). The 11-year Bull Market run was the longest in the United States history. Our country of late has been on economic life-support to get through the pandemic, which now brings up the question are we in a Bear Market? Yes, yes we are.
Fourth: The definition of “Bear Market” by Nerd Wallet (as of Sept 22 at 4:09 am)
“A bear market is defined by a prolonged drop in investment prices — generally, a bear market happens when a broad market index falls by 20% or more from its most recent high.”
Factoid – The average recession post WWII is 11.1 months according to my assistant Siri
Litmus Test Review - 4:20 am snack break:
The stock market/DOW is down and is a sea of red. I advise for most homeowners to stop looking at the market and if you are on the cusp of retirement talk to your financial planner. I’m not here to argue with the “Real Estate” gurus or day traders that short stocks*. The old quote by Nathan Rothschild stating when there’s “Blood in the streets” is the time to buy. We are seeing this firsthand within the roofing industry and across many other industries, however especially from supply chains.
These lumber yards and building supply chains are being acquired at an unprecedented rate across the United States. It’s clear the writing has been on the supply chain’s wall for decades. Today’s innovative technology, aging ownership demographic, consumer buying recognition, and outside investors coming to party. This moment in time is reminiscing of when the Wal-Mart’s came to town and gradually destroyed the local stores in the 90’s & early 00’s – goodbye grocery, sport store, clothing store, electronic, and pharmacy. Well, the same thing is happening within the roofing supply industry by the “oligarch’s” such as ABC Supply, SRS, Beacon Building Products, and the Home Depots of the world. The larger economics are at play and good for all the parties involved, is not a “sky is falling, sky is falling” aspect, but if anything a well-timed exit for those supply chains as we face another shimmering market.
Do you not believe we are in a recession? (If so please ask yourself the following questions):
· Do you fall within the age range of the mid 30’s (earning 30’s) and/or 50’s? Feel as if you were or are thriving within your specialty or career growth as you’ve became proficient in your career similar to the 10,000-hour rule by Malcolm Gladwell – another great book recommendation.
· Recency Bias? Has the good times been from the last few years or have they been a non-stop continued linear growth over the decade (remember that whole bull market).
· Do you work in a “protected, necessary” industry? (Healthcare, Military, etc.) and Covid may have fly wheeled your profession and or unlocked untapped earning possibilities.
· Do you live in a state such as: Florida, Arizona, Indiana, or a etc. that is experiencing population migration verse plagued by population decrease as states such as New York, Illinois, or California?
· Are you under the age of 30? Maybe thinking what is a recession other than a storyline in business class? Outside of the COVID experience there’s been very minimal economic slowdowns, and possibly in been in high school during the last one. Generation Z grew up in a good economy period time and were probably in schooling during this time.
· You are waiting for a big media outfit or newspaper headline to write it up as “BUNKER DOWN WE ARE IN A RECESSION”
“So how does the upcoming or current recession affect the future of my roofing system?”
Inflation – Purchase Power (5 am – there goes the gym)
Inflation is annihilating the pockets and wiping out wage increase quicker than they hit the account. So, when it’s time to replace your roofing system in the coming years or tomorrow, be mentally prepared for “the big reveal.” I would advocate that you identify your goals with the property before you complete a repair or the full replacement for your home, commercial plaza, or your client’s property. Come to terms whether this property is a home or a house? Do not panic at the site of water coming in, and do an honest assessment (ask yourself – starter home, rental property, house, Brrr strategy, etc.). Often a leak is tied to an insurance covered event, but if you have an older roofing system in which are not proactive it’s coming out of your pockets.
For instance, the average estimate for our client’s that reached out in 2019 (Pre-Covid) and followed up again this year faced a 35% increase in price (on average). If you identify the property as a “house” please do not go down the path of break-through solar energy system’s or hi-tech metal roofing system. Simply identify a solution for the problem. Fix that problem and drag your feet to the next one. If the property is your home, then explore those presented options such as extended warranties, workmanship path, and system enhancements. Do yourself a favor and recognize inflation is stretching your so minimize the emotional buying, but please double down on some logic. Shut off the HGTV during this 11-month stretch.
I want to reiterate, please do not be the homeowner calling 10 roofing contractors for your repair. Why waste your time or Jim’s? You could have worked a full day and made up the difference between price options 1 or 2 instead you are now playing a game of contractor roulette with a 26% chance that contractor shows. The roofing industry is so cut throat among pricing that they as a whole STILL don’t charge for the estimates compared to electricians, plumbers, HVAC, etc., so please don’t take advantage of the tradesman whom are trying to make ends meet and coming out for free.
Policy Changes – Insurance Coverage
The shift and landscape is quickly changing among insurance carriers. The last three years have allowed big insurance carriers to implement cost-saving practices and fine tune their policy language to better protect their own interest rather than the insured. Insurance is a business, it’s no different than hedging a bet. So partner your life and home with trusted insurance provider(s), but more importantly people that will implement the items described in this.
If you have a tree fall or a tornado destroys your home, call Aaron Rodgers or Flo to file that claim. However, if a pea-size hail event and your roof is 6 years old, it may be worth it to contact a local trusted roofing contractor opposed to that out of towner. Allow the established professional to show up and show out for his community. So please check the following items in case that tree does fall or that baseball size hail does damage your home. The proper coverage and small deductible will help you minimize out of pocket expenditures during these trying times for some.
1. Low Cost/Fixed Deductible such as $500 to $1500 range for a wind/hail event.
2. Wind/Hail Endorsement – Some people have this excluded
3. Building Code/Law & Ordinance Endorsement – Coverage for new building codes.
4. Real Cost Value Coverage – Pay’s you in today’s dollars for the replacement, not the cost in the current condition (depreciative total)
Due your due diligence and please don’t trust the family agent of 20 years you never actually. Talk to them at least once a year and confirm the above items are in your policy. Splurge a little and pay the extra amount of $15 a month or whatever coverage upgrades go for.
Established Professional Organization – Trusted Installer
Most likely there is a 15+ year experienced licensed local contractor by you. They too probably installed, contracted, and worked with maybe even your neighbor during the last financial collapse. If they are licensed, bonded, and insured great, however are actually solving that specific problem in the best manner. These are items you need to screen, ask, and trust your gut. There are times I know “I’m the contractor for them, but they are not the customer for me.” We carry ourselves to do right by the homeowner and solve those problems, all while abiding by local codes and best practices. Duct tape does a lot and is one of the best innovations of the time, however it’s not the right product for all problems.
I was in the midst of college/high school during the last recession. I felt honored and privy to have heard the war stories from manufacturers, installers, contractors, and first hand hearing my father’s construction business. Much like all industries and career paths there’s ebbs and flows within them. This upcoming recession may appear as a war for some or peace to others, so it's critical to align your roofing needs and purchasing decision alongside with a trusted company.
For instance, over 70% of the roofing contractors belly up after 3 years in business due to a variety of issues such as: day to day, cash flow, insurance issues, top five most dangerous occupation, and etc. So if your family opts for a blue-blood roofing organization it only better protects while also minimizing your overall risk. How can company give a 5-year warranty when they haven’t been in business for 2 years yet, so be honest with yourself.
Need verse Want – Let’s get Introspective
I hate to be the messenger, but that beautiful, bourbon colored roofing system is more important than that newly purchased 2019 Mercedes CLK. Take yourself back to when you went to purchase that vehicle? Did you happen to avoid the salesperson at all cost? If you intentionally searched for them, then you really wanted that 2019 Mercedes CLK and I’d love to hear why (not bad, curious to hear)! However, now let’s reposition yourself with a roofing system or home improvement consideration, I bet you invited those contractors into your home (Be honest was it only 1 roofing specialist?).
See, a roofing system and repairs will always be a true need, especially when your housing is the best source of untapped equity and the largest day to day expense. At this time, you need to be looking at your home as the original settlers did their oxes during Oregon Trail period. This is a period to re-shuffle those financial goals or home projects. As someone that chose to travel during COVID, I refuse to say anti-travel. Seriously, ask yourself what would you do if you had a chance to fly, stay, and eat in Hawaii for under $1,000 a person? See this recession may present the lowest rates for those dream’s and present opportunities. That same period in 2020, they may have valued their health, fishing equipment, or a new side venture. A great book to read is “I will teach you to be rich” by Ramit Sethi who highlights it’s imperative to choose and identify the 1 to 2 things you enjoy the most. These are the items or activities in which you enjoy purchasing or seek outside of the work place. Again I’m not advocating for you to go full bear market on yourself, but identify what you deem is “rich” and important for you.
I already mentioned shutting off HGTV to save you money from unnecessary home remodels. However, I understand not everyone enjoys writing papers about maybe “non-existent” recessions at 3 am on a Thursday, and prefer watching HGTV. However, do keep in mind that the old phrase of “keeping up with the Jones” is covered in emotion and feeling – no logic at all. The random COVID stimulus money, child credits, and other economic boosters have severely fogged our understanding of the economic landscape, while only inflating us further towards an all-time high inflation since the 1970’s. So it’s time to bootstrap and reassess the home improvement projects, unless they’ll add equity to your home or life. If you live in Florida, Indiana, or any booming state than proceed without caution, because everything goes up in those places.
Let’s Talk Money - Market Rates (Have to actually work – 5:17 am)
At this point you have completed the following assessments:
1. Identified the type of property you have - home or house.
2. Maybe considered the insurance outlet, but now have proper coverage.
3. Narrowed down to capable, licensed service provider.
4. Re-evaluated the need vs. want in the actual service
5. Time to identified ways to pick up the tab.
Do you recall the 2019 Mercedes CLK earlier? Maybe it’s not a Mercedes CLK, but maybe you decided to purchase a (insert your car type) ______________. Did you inquire about paying straight cash or did you ask about monthly payments?
It’s interesting because the home improvement industry and specifically the roofing industry is like the tortoise within the financing realm. Many industries such as the HVAC outfits, flooring companies, and other’s service providers run circles around the roofing industry, when it comes to the hard, honest questions such as “How do you plan on paying for the roofing system?” Many are often scared to bring up this conversation with homeowners. Older roofing consultants grew up with parents whom would reprimand them for discussing money or asking a competitor about how much they paid. However, as Bob Dylan has said “times are changing” and they are changing fast.
For instance, the ever changing environment has led the FED to increase the market rates to offset sudden inflation. We have seen home mortgages go from 2.75% to a local Indiana branch showing 6.05% in 3 years! These market rates will trickle down into the home improvement space, while possibly altering the lending companies risk tolerance. So it’s in your best interest to ask your mortgage lender or banking partner about a HELOC (Home Equity Loan On Credit) options during a recession or have that available at a rate. Think of it as an en emergency fund that has been preapproved and you cannot use.
Again, I’ll continue emphasizing a preferred or trusted contractor option. It is imperative for the best market rate and guidance. Not too long ago a homeowner in 2019 would balk at signing a 60 month fixed payment plan at 9.99% for their roofing system. Today that same deal would have saved them 25% compared to them wanting to pay “cash” in 2022. Timing is everything in life and it’s imperative that you take the proper steps to ensure each dollar is working for you and with you.
Quick Summary/Implementations (I need help, anyone hiring outside of roofing 5:55 am)
Recognize your current spending habits.
Inflation is real and not going anywhere. Stretch that dollar like a yoga instructor. Cut some cords or children (You hear those college loans are forgiven too?).
Identify the specific problem plaguing your house.
Repair verse Replace & House verse Home.
Get an iron-clad insurance policy and review every year.
Low deductible, competitive premiums, and proper coverages
Include 1 or 2 local trusted contractors in your home project process.
Allow the local one to review storm/insurance damage – more familiar with area and recent storms. Checks & Balances
Know your numbers
Consider financing even if you have a pile of cash. Why deplete your cash reserve if this goes 1 to 2 years? Fixed low cost monthly payments and emergency fund is building.
I’m done, I swear
(Conclusion to make it look formal - 6 pm.)
Ok, I’m done and if you finished this writing piece, I ask you don’t inform my wife about this, because she’ll think about the laundry that I neglected. However, today the conversation is about cleaning your balance sheet to ensure your family is in the best financial circumstance. A recession proof roofing plan and I’ll mail you a TRC tin foil hat if you abide by any of it. The next best option is to rent, then the properties not your headache.
Yes, this is comical in some ways, and sad in others. Sad in the sense I wrote a 10-page paper on a whim at 2:30 am and comical in the sense that decade old defining economic characteristics are being misconstrued or neglected by political parties, search engines, and the media. This is not about pointing fingers at political parties because both sides suck. Yet, I do believe the overall lack of transparency has me feeling like Chicken Little. Needless to say the indicators and real-time pointers are there and I ask you to have urgency to recognize your own expenditures, continue cautious spending, but not overly cautious, because as we know the wonder wiz of Warren Buffet said “fearful when others are greedy, and greedy when others are fearful.”
Disclaimer(s):
· I’m not an economist nor a financial advisor, so good luck on your life endeavors
· I’m not a writer and I probably won’t proof this much so sorry to you English lovers. The Jokes on you.
· I’m a roofing contractor and if you need help, assistance, insight, questions, concerns, photos, videos, or anything roofing please email me at phillipgcooper@gmail.com
Stock Shorting/movie recommendation:
short stocks* (the practice of purchasing stock futures “options” at a lower price - predicting declines).
FYI: If you are interested in learning more about shorting, check out “The Big Short,” which highlights the investors that did this during the recent banking collapse in the 00’s.
Book/Readings recommendation(s):
Automatic Habits – James Clear
10,000 Hour Rule – Malcom Gladwell
Recessions and how does it affect my roofing system – Phillip Cooper
“I will teach you to be rich”