Tag Archive for 'construction'

Wells Fargo Reports: Builder Confidence Slips in January

On the heels of a 6-point gain, the NAHB/Wells Fargo Housing Market Index fell 2 points to 67 in January. Confidence declined across components, suggesting a rebalancing following the post-election surge.

Homebuilder Sentiment Dips

After a sizable 6-point jump in December, the NAHB Housing Market Index fell 2 points to 67 in January. All three index components declined on the month. Present sales conditions reported the largest drop, falling 3 points to 72.

Despite the monthly decline, builder confidence remains at a solid level—just 2 points shy of its cycle high. The reading is consistent with modest strengthening in homebuilding.

Confidence Slides in the West

Homebuilder confidence fell in the West, Northeast and the South, while sentiment in the Midwest was unchanged. The West reported the largest drop, falling 11 points. The big drop in the West may be weather-related, given the recent rains and snow.

While challenges for the housing market remain in place, we expect continued gradual improvement in home sales and single- family construction in the year ahead.

Wells Fargo Reports: December Housing Starts Headline Full of Hubris

Housing starts jumped 11.3 percent in December, ending the year at a 1.226 million unit pace. Multifamily starts surged, while single-family posted its second weak monthly reading. Permits fell during the month.

Solid December Report, but Payback Is in the Offing

Thanks to an outsized surge in the volatile multifamily component, housing starts ended 2016 on a solid note, rising to a 1.226 million unit pace in December from an upwardly revised 1.102 million unit rate in November. Although the strong reading is welcome, the level of starts looks to be bit exaggerated, especially as we are in the seasonally slow period of the year and swings in the data due to the seasonal adjustment process and weather distortions play a larger role in the headline reading. The three-month moving average shows starts are up a more moderate 5 percent in December, with single-family activity eking out a 0.6 percent gain and multifamily increasing 16 percent. Permits, which tend to be less volatile, fell 0.2 percent in December but grew 1.9 percent on a year-over-year basis.

With December now in the books, we see that the annual average for permits is running ahead of starts, pointing to a pickup in activity in the coming year. In previous publications, we have written about the shift in construction toward less expensive homes, which is a welcome sign following the dearth of activity in the lower-priced home segment as many investors converted units into rentals. We suspect some of this activity will cool as the recent spike in mortgage rates following the election curtails overall activity. December mortgage purchase applications are already showing some of the strain of higher mortgage rates, declining in December from a two-year high.

The trend in multifamily starts seems to be unrelenting; however, we expect some payback in the coming months. Starts jumped a strong 57.3 percent in December to a 431,000 unit-pace. On the other hand, permits fell 9.0 percent to a 393,000 unit-rate. With lending standards in multifamily tightening and apartment rent growth moderating, we expect the pace of multifamily building to cool in 2017.

Another seemingly hopeful sign is builder sentiment. The NAHB/Wells Fargo Housing Market Index remained at an elevated level in January, suggesting some upside risk to overall starts. Although builder sentiment is typically seen as a forward-looking indicator for starts, the 11-year high in December and still-elevated reading in January seems to be somewhat unbridled and could also reflect some election euphoria. Similar to residential borrowers, developers likely rushed to “lock-in” financing. We see the same pattern in consumer sentiment, which is now at a two-year high. That said, the builder sentiment index declined 2 points to 67 during the month, with all three components including current sales, future sales and prospective buyer traffic retreating.

Looking ahead, the underlying fundamentals and still rising credit availability suggest starts have more room to run. We expect starts to average a 1.17 million unit pace in 2017 and 1.22 million unit rate in 2018.

Tom Ewing’s Environmental Update — 2 Weeks Worth

Week of January 16, 2017
* Think of cities without trees: too depressing. Urban forests are critical. The Department of Agriculture works with cities via its National Urban and Community Forestry Advisory Council, established by Congress in 1990. The Council meets 2-3 times/year. The next meeting is February 9, 10-5 EST, in Washington; you can participate via teleconference. Program topics include: the 2017 Work Plan; a presentation on innovation in timber building construction; and discussion on implementing the National ten year action plan (2016–2026).

* Two important technology initiatives advanced last week: the Department of Commerce released its draft Green Paper on how the federal government can best facilitate development of the Internet of Things (IoT). DoC’s work is based on a public meeting held last September. In an email staff wrote “We look forward to continuing the conversation… helping to enable the incoming administration to be well informed about this important technological development.” Nice. Comments due: 02/27. The second important publication was DOT’s Notice of Proposed Rulemaking for vehicle-to-vehicle (V2V) communications for new light vehicles and to standardize the message and format of V2V transmissions. Comments are due by April 12.

* We really don’t like you but we like your money. If you’re an oil/energy company that might be the message you take from a State Department grant titled “Workshops for Promoting Womens Full Participation in Community Consultations with Oil and Gas Companies.” Hmmmm… Text explains that this “is a new program via ENR aimed at increasing womens participation in community consultations with oil and gas companies so they can represent their own needs and advocate for their share of revenue, jobs, and other benefits; and join in community decision-making processes.” Just don’t mine, pump or extract any nasty carbon product, or try to sell it. Uh, now about the money…

Week of January 23, 2017
* DOT finalized rulings last week on national highway system (NHS) performance standards. How/whether CO2 would be included was a big question. The answer: CO2 measurements are now required as part of system performance, specifically the percent change in CO2 emissions from the reference year 2017, generated by on-road mobile sources on the NHS. All State DOTs and metropolitan planning organizations with NHS mileage in their State geographic boundaries and metropolitan planning areas, respectively, will be required to establish targets and report on progress. The FHWA will assess every 2 years to determine if a State DOT has made significant progress toward achieving their targets. (Uh… and if they haven’t…?)

* California’s Air Resources Board (ARB) released its Draft Freight Hub Survey for Truck Stops. The survey is the first in a series of six such surveys from ARB this year. It’s meant to gather specific facility and equipment information from California based truck stops. ARB staff wants comments on the information included in the survey. The data will help ARB understand activity at CA truck stops, assess the potential for emission reductions, inform potential strategies for reducing those emissions, and direct funding assistance efforts.

* Last week I noted DOT’s proposal to establish vehicle-to-vehicle communication standards. Now here’s a citizen who speaks clearly and forthrightly – no on-the-fence waffling: “Drop this Bill in the Gulf of Mexico…….It’s actually another way of controlling the people. I oppose this bill and any others like it.” Well, the mail clerk will know which stack to put that letter in!

Tom Ewing

Note: The delayed posting was due to the fact that Site-K Construction Zone was in Las Vegas covering the 2017 World of Concrete.


Volvo CE announces headquarters move from Brussels, Belgium to Gothenburg, Sweden


Volvo Construction Equipment (Volvo CE) has today announced that the company’s global headquarters will move from its current location in Brussels, Belgium to Gothenburg, Sweden. The relocation will facilitate closer cooperation with the Group’s other business areas and allow for better usage of the competence and resources of the whole Volvo Group.

“Our Brussels location has served us well since the office opened in the 1980s and this move comes at the right time for Volvo CE as we continue to adapt our company to changing global business dynamics. It allows us to be physically closer to the other Volvo business areas and it will facilitate closer cooperation and sharing of best practices,” states Martin Weissburg, President of Volvo CE and Member of the Executive Board of the Volvo Group. “Sweden is also home to approximately 4,000 Volvo CE employees and where some of our largest manufacturing, commercial and technology sites are located,” adds Martin Weissburg.

The Volvo CE headquarters will be operational in Gothenburg in the third quarter of 2017.

ABC Reports: Overall Construction Input Prices Firm in December as Energy Prices Surge

Construction input prices rebounded in December after experiencing a steep decline in November, according to analysis of U.S. Bureau of Labor Statistics data released today by Associated Builders and Contractors (ABC). Input prices rose 0.4 percent for the month and are up 2.1 percent year-over-year, the largest 12-month increase in 30 months.

Nonresidential input prices collectively experienced a slightly larger increase, due in part to surging iron and steel prices, rising 0.6 percent for the month and 2.2 percent on the year. Though a number of input categories have experienced significant increases in prices in recent months, the overall price gains are largely attributable to energy prices. Crude petroleum prices rose 18.9 percent for the month, natural gas prices rose 23.1 percent and unprocessed energy materials rose 14.6 percent. Concrete products and the category that includes prepared asphalt experienced minimal declines in prices in December.

“While there are a number of factors that have contributed to the recent firming in input prices, recent deals made by OPEC and non-OPEC members to suppress oil production is the most consequential,” said ABC Chief Economist Anirban Basu. “While oil prices remain above where they were before production agreements were reached, the price of oil has generally failed to rise much beyond $50.

“Other factors have also led to a steady rise in materials prices including an improving global economy,” said Basu. “While not accelerating dramatically, global economic growth in 2017 is expected to exceed 2016’s performance, with nations like Brazil and Russia no longer mired in deep recessions. U.S. economic growth is also expected to be stronger in 2017, lifting the overall global economic outlook and supporting more bullish commodity markets.

“It is probably too early for contractors to become excessively preoccupied with rising materials prices,” said Basu. “Despite recent signs of economic improvement, massive levels of debt and commercial vacancy in much of the world will constrain both worldwide economic growth and global construction. Moreover, commodity traders among others are well aware that the planet is physically able to supply plenty of oil, natural gas and many other commodities, particularly if prices rise further. That knowledge in and of itself tends to place a lid on input price increases absent a major geopolitical event.”

December Construction Input Prices