It's about the jobs!

Today the Register reports that Lennar is telling the sub-contractors that they need to reduce their prices by 5% or more or face being banned from bidding for 6 months.
"As our customers continue to pay us a lower price for our homes, we must in turn pay you a lower price for your services," said a letter circulated to subcontractors in Lennar's Orange Coast, Corona, Temecula and Palm Springs divisions.

What does this mean for the local economy? Well the sub's will have less profit and less profit means less spending and less spending means slower growth and slower growth means less jobs etc, etc. This trickles down slowly and we will see more and more of the effects.

BOSTON (MarketWatch) Centex Corporation, Chief Executive Tim Eller during the company's quarterly earnings call Wednesday said the home builder's headcount is down 17% since the beginning of its fiscal year. "There will be more reductions in the [fiscal] fourth quarter," the CEO said. "We're taking the necessary steps to get our balance sheet and our organization to their fighting weight," he added. (Their fiscal fourth quarter ends in March)

A reduction of 17% and more layoffs in the fourth quarter to come mean that a lot of people will be looking for jobs. Where are they going to go? It is not if the other homebuilders are in hiring mode. The talented people will find new jobs but the people who know nothing other than homebuiding will have a tough time finding a new job.

Here is some history to add:
William Lyon cuts 21% of work force June 24, 1992
Byline: Andre Mouchard
The Orange County Register
The William Lyon Co., Orange County's biggest homebuilder, has trimmed 73 jobs, or 21 percent of its work force, citing the long-term real-estate downturn and dim prospects for a quick turnaround.
"We're not building and selling as many homes as we used to. And, with fewer homes under construction, we're needing fewer people," said Lyon Co. spokesman Rick Sherman. "It's a very sad day."