Martin Silver is a practicing attorney with offices in Hauppauge, N.Y. He was a flooring installer before and during the time he went to law school and has since represented numerous industry people and companies. To contact him, call 631-435-0700.
It can only get better
As this year comes to a close, one word is on everyone's lips: economy. Whether we call it a business "downturn," a "slump" or a "recession," or whether we simply say the economy is in the toilet, it all means the same thing- we have a problem.
One quick look at the various headlines in the American Bar Association Journal that was e-mailed to me this morning tells the story:
• "Battling for Scarce Legal Work"
• "Legal Employment Down 12,000 Jobs"
• "HA (Law firm) Axes Associates"
• "Law Firms Working on Collapsed Mergers & Acquisitions May Never Get Paid"
I should note this issue of the journal also has a story about a lawyer who is alleged to have stolen $380 million and another story about how the top lawyers at one of the major law firms are now billing as much as $1,260 an hour.
In any event, there is no doubt business is down for just about all of us, including those who manufacturer, distribute, sell and install flooring. People who are worried about losing their jobs and whose houses are in foreclosure are just not in the mood to re-carpet their bedroom.
We have way too many clients whose homes have lost 20% to 30% of their value from when they were purchased, and, if sold today, would not provide enough funds to pay off their existing mortgage. This combined with the fact that many of these homeowners should never have been given these mortgages in the first place has contributed greatly to the mess we are in.
The banks that made these ridiculous mortgages are now being forced to take the "hit." This is what many people believe caused the current situation. In many cases the banks are allowing a "short sale" of the property in which they discount the amount that is due from the buyer by as much as 30% to 40% in exchange for a release of the mortgage lien so the property can be sold. The alternative, in most of these cases, is for the bank to foreclose and eventually take ownership of the property that is now worth much less than when originally bought.
Just yesterday a client of mine asked me to help him with the paperwork needed to buy a house as an investment in Las Vegas for $50,000 from the bank that had foreclosed on it. This person happens to be a well-respected financial planner, and he believes the housing market has just about hit bottom and is putting his money where his mouth is.
To a large extent, the flooring industry depends upon the housing market. People who are selling one home and trading up to another need lots of flooring. As the foreclosures begin to die down, many people believe buyers will begin to take them off the banks' books, remodel them and hopefully sell them to a family that needs a place to live. Such a family may now be able to afford this home at a price which is maybe 50% less then what is would have cost two years ago. They could even have a little money left over to buy some additional carpet.
Still, another sign of the times is reflected in a headline in the New York Law Journal: "As Economy Falters, More Employees Sue to Enforce Noncompetition Agreements." The article goes on to note this increased litigation is based, in good part, on the employer's hesitancy to lose what few customers it has remaining to a competitor for whom its ex-employee has gone to work.
Our economy has always been cyclical. Many observers appear to believe we are now at, or close to, the bottom of the current cycle, and so the economy can only get better. Let's hope that they are right, and that if we hold out a little longer there will be better days ahead.