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Morningstar U.S. Housing Outlook 2020

Expect Starts of 1.3 Million in 2020, as Conditions Remain Conducive to Growth

Despite a slow start in 2019, building has picked up during the second half of the year, and we think the momentum will continue in 2020. Contractors are poised to break ground on 375,000 new multifamily and 925,000 single-family units, up 3.6 percent in total from 2019. The only change to our forecast is an increase in how many of these starts will be multifamily units. Land constraints and limited savings among many adults have sustained multifamily activity above our expectations in recent years, leading us to re-evaluate our near-term mix assumptions. 

A disproportionate share of future growth should show up during the rest of 2019 and in the first quarter of 2020. Rising housing markets tend to achieve most of the incremental building during the offseason, when labor is less constrained. Positive sentiment among builders, buyers, and bankers gives us confidence that the recent momentum will be sustained, at least in the near term.

Our Long-Term Forecasts are Unchanged 

There have been no structural changes that warrant revisiting our long-term housing forecast, which is driven by two key factors: more household formation among the working-age population and population growth. 

The portion of adults age 45 and under who head a household should climb over the next five years as economic conditions and credit scores improve. The current inventory of vacant homes is too low to accommodate these new households, which should drive demand for new homes. Nevertheless, we still expect headship to fall short of levels seen before the global financial crisis, when lending standards were too relaxed.

Our forecast also assumes mild population growth, based on both census-forecast fertility rates and our internal immigration forecast. Immigration is poised to fall short of historical norms, with heightened restrictions imposed on illegal overland immigration and legal immigration from the Middle East. 

Year to date, household formation has strengthened among younger age groups, giving us no reason to revise our outlook for households. Immigration policy was also stable during the third quarter, so we have left our population forecast unchanged. All told, our current forecast assumes that starts stabilize at 1.4 million units per year during midcycle conditions.

Homebuilding 2019: In Like a Lamb, Out Like a Lion 

The year began on a low note. Adverse weather and tepid underlying demand left most investors wondering whether 2018 would be the cyclical peak for new-home construction. But surveys can be erratic, and demographic trends play out at a leisurely pace. As we expected, housing construction returned to year-over-year growth in the third quarter. 

Annualized new-home construction accelerated through 2019; third quarter starts rose 3.9 percent over the prior year to 1.28 million. That momentum should carry starts higher over the next five years before leveling off around 1.4 million properties per year. 

In 2020, we believe the foundation is laid for 1.3 million new homes. Public builders grew new orders by nearly 16 percent during the third quarter and are optimistic about the coming year. Land in inventory should give them the ability to meet our outlook for the year. Demand conditions are no slouch, either. Over the past few quarters, we estimate that underlying demand for new homes has averaged nearly 1.5 million units. Appetite is there, which will increasingly be filled by new construction instead of inventory reduction.

Acceleration in Single Family, Nearly Flat Multifamily Builders are Motivated and Able to Supply 3-4 Percent Unit Growth in 2020 

A decade of building bigger, better homes has left the market in need of entry-level offerings. But over the past few years, a growing share of public homebuilders learned that new buyers have different needs. At first, only a few builders shifted to lower-price offerings, but their early success has encouraged more to follow suit. These units come with narrower gross margins but can generate comparable returns on capital through higher volume and faster construction. This gives builders plenty of reason to pursue additional lower-price starts in the coming years. 

Over the past few years, public homebuilders have proved adept at growing new order volumes more than 10 percent per year when conditions are right. Management teams have inventoried land and the rights to purchase land over the past few years. As ordering picks up, the companies have been quick to deploy the requisite supplies and labor to job sites.

Finding capable construction workers has been the builders’ largest constraint. Tradesmen, such as electricians, plumbers, and carpenters, have been scarcer. However, higher pay and stable employment have caught the attention of discouraged workers. People who were newly searching for construction jobs drove most of the employment growth over the past 18 months. That means today’s low unemployment rates are unlikely to cap how many homes can be built each year. Average employment growth of 4-6 percent over the prior two years should support comparable growth in new-home construction.

Apartment Construction Will Remain Near Recent Highs 

REIT managers have long warned investors that multifamily construction will slow. However, these companies do the bulk of their business in high-density U.S. cities, where rents are stretching budgets to a breaking point. But it’s important to remember that cities like San Francisco and New York make up only a fraction of U.S. apartment construction. 

The suburbs and lower-density urban areas still constitute a huge source of total multifamily construction. Skyscrapers are in the mix, but the United States has an abundance of land, making low- and midrise projects more cost-effective. Builders have options in most cities. Over 75 percent of multifamily units are being built in metros that are less dense than the average U.S. city. High land costs in the urban core will drive most builders into the near-suburbs and along light-rail lines to control costs and keep rents palatable.

A Healthy Economy and Low Rates Will Sate Housing Appetites Slow but Steady, Headship Rates are Creeping Higher 

Households collapsed indiscriminately across every age range following the global financial crisis. Foreclosures and merged living arrangements meant less construction was needed to house a growing population. This process of splitting apart or coming together is the single largest driver of demand for new homes. 

Wages are now growing steadily, and unemployment is nearing record lows. A stronger economic backdrop should facilitate marriage, childbirth, and divorce – events that demand more residences and are often forgone when times are tough. Barring an economic shock in 2020, we expect the upward trajectory in headship to continue over the coming years.

Rising headship rates have caused demand to outstrip supply over the past five quarters, reducing the number of vacant homes and apartments. We estimate underlying demand at around 1.5 million units annually, well above starts, which remain below 1.3 million as some demand is met with the drawdown of existing homes. Diminished inventories typically lead to higher prices per square foot, encouraging builders to increase output.

If you are interested in reviewing the complete Morningstar report visit Morningstar.com

This feature appeared in the February 2020 issues of the ACP Magazines:

California Builder & Engineer, Construction, Construction Digest, Construction News, Constructioneer, Dixie Contractor, Michigan Contractor & Builder, Midwest Contractor, New England Construction, Pacific Builder & Engineer, Rocky Mountain Construction, Texas Contractor, Western Builder

Turner Construction Teaches Educators About the Industry Through Externship Program

By Jessica Hoover

Last summer, the Rutherford Works Teacher Externship Program paired educators from five middle schools in Rutherford County with five companies in the fields of construction, advanced manufacturing, health care, information technology, and supply chain management. The program is a partnership between the Rutherford County Chamber of Commerce and Rutherford County Schools. 

“The goal of the program is to help expose educators – so teachers, counselors, administrators – to the world of work,” said Beth Duffield, Senior Vice President for Education and Workforce Development for Rutherford County Chamber of Commerce. “Most educators don’t have extensive work experience outside the classroom. We want them to become familiar with our employers and some of the challenges that our employers are having in finding a qualified workforce. Ultimately, we want the educators to utilize what they learn from the employers in the classroom to help students learn about careers in the related industry.”

A Multi-Faceted Program

On the first day of the program, all 22 educators from the five schools gathered at the Chamber of Commerce for orientation.

“During our first day with the educators, we give them a deep dive into all things high school,” Duffield said. “We teach them about graduation requirements, early post-secondary opportunities and work-based learning experiences so they are able to talk about what’s next with their eighth graders. We also review all the programs that the Rutherford County Chamber of Commerce facilitates with our schools.”

After orientation the teachers are divided into five groups, with each group going to Turner Construction Company, Ingram Content Group, Magneti Marelli (Calsonic), Nissan Group of North America or TriStar StoneCrest. Each company developed its own two-week program independently. 

Turner was the only company in the construction industry. Turner hosted five educators from Christiana Middle School over the course of the two-week program.

Turner’s program involved the educators job shadowing the project engineer, superintendents, safety manager and project manager for the Saint Thomas Rutherford Hospital Tower and Operating Room Expansion in Murfreesboro, Tennessee. 

“Our educators got the opportunity to see the logistics that go into an expansion project at a functioning hospital,” said Paul Lawson, Project Executive for Turner Construction Company. “They took part in daily huddles, scheduling meetings, pricing reviews, submittal reviews and construction activity notice meetings held with the hospital’s engineering and maintenance staff. I think many of them found it eye-opening to see the level of coordination that goes into the work we do.”

“The teachers that worked with Turner last summer learned about safety and quality and teamwork,” Duffield said. “They were exposed to as much hands-on, real-world work as possible.”

Reaching Students Through Educators

The Rutherford Works Teacher Externship Program gives educators real-world experience in STEM-related fields so they can advise students on their educational and career goals. The program aims to increase the number of individuals with both soft and technical skills needed to fill the growing number of jobs in the construction, advanced manufacturing, health care, information technology, and supply chain management industries.

“Ultimately, we’re trying to reach students through these educators,” Lawson said. “We understand that middle school is pretty early to be thinking about a career, but we think it’s beneficial to create awareness of our industry early on, so that when students do start thinking more seriously about a future career, there’s already some familiarity there. … Each teacher who participates in this program could potentially reach 60-plus students per year. By drawing on their firsthand experience through the program, they can help students understand what’s interesting and fulfilling about our work, as well as how skills like math and science can be beneficial in the engineering and construction industries.”

After the two weeks is over, Duffield said that each group of educators identified a problem that they wanted to solve within their school and developed a school-wide implementation plan for sixth, seventh, and eighth grade. Turner’s five educators from Christiana Middle School implemented career and lifestyle exploration throughout all grade levels, along with monthly advocacy projects. They also created a parent pathway night so students and parents could make connections with companies.

“The teachers who took part in the program this year told us that it was very illuminating to see the behind-the-scenes planning and coordination that is involved in our projects and that students seemed to be genuinely interested in hearing about their experiences,” Lawson said. “Because these students are in middle school, we won’t know for years if any of them end up pursuing careers in construction, but our hope is that through this program and similar initiatives, we’ll begin developing our construction workforce of the future.”

The 2020 Teacher Externship Program will be held from June 8-19, and participating teachers will be paid $20 an hour for the two weeks of the program.

This feature appeared in the February 2020 issues of the ACP Magazines:

California Builder & Engineer, Construction, Construction Digest, Construction News, Constructioneer, Dixie Contractor, Michigan Contractor & Builder, Midwest Contractor, New England Construction, Pacific Builder & Engineer, Rocky Mountain Construction, Texas Contractor, Western Builder

DEWALT® Expands XTREME Subcompact Series™ Tool Offering

DEWALT expands the XTREME Subcompact Series™ tools, now a line of six compact and performance-packed brushless 12V MAX* tools, with the XTREME Subcompact Series™ 12V MAX* Brushless One-Handed Cordless Reciprocating Saw (DCS312). It is optimized for one-handed use across a wide range of applications; cutting PVC, metal pipe, wood, conduit and EMT.

The 12V MAX* Cordless Reciprocating Saw is compact and performance-packed. At only 3.04 lbs. (bare tool) and 12.12-in. in length and featuring an efficient brushless motor, it delivers up to 2,800 SPM. This is combined with a 5/8 in. stroke length that offers fast and efficient cutting. The saw is equipped with an LED for visibility, a variable-speed trigger for added control, and a tool-free blade release for quick and easy blade changes.

The XTREME Subcompact Series™ tools are powerful solutions for electrical, drywall, remodeling, automotive, metalworking, woodworking, and masonry applications. For professionals looking for capable, subcompact tools that perform tough applications in hard to reach spaces, XTREME Subcompact Series™ tools, now including the XTREME Subcompact Series™ 12V MAX* Brushless One-Handed Cordless Reciprocating Saw, are the ultimate choice.

Available in spring 2020, the XTREME Subcompact Series™ 12V MAX* Brushless One-Handed Cordless Reciprocating Saw will come kitted with one 3.0Ah lithium ion battery (DCS312G1) and as a bare tool (without battery or charger) (DCS312B). Each tool comes with a three-year limited warranty, one-year free service contract, and a 90-day money back guarantee. More information on the line of XTREME Subcompact Series™ tools can be found at DEWALT.com.

* Maximum initial battery voltage (measured without a workload) is 12 volts. Nominal voltage is 10.8.

About DEWALT

DEWALT is obsessed with how users work in the real world and is relentlessly pursuing total jobsite solutions. By incorporating its latest technology and industry innovations, DEWALT is leading the charge for the jobsite of the future. DEWALT products. GUARANTEED TOUGH®. For more information, visit www.dewalt.com or follow DEWALT on FacebookTwitterInstagram, and LinkedIn.

GPS Tracking of Light/Medium Duty Fleets Increases Profitability Through Driver Accountability

By Carlo Chatman, Power PR

For any company with a fleet of light or medium duty vehicles, from service contractors to vendors and those in the transportation industry, increasing profitability often comes down to fostering an environment of greater employee accountability.

The concept of accountability is defined as “the obligation of an individual to account for his/her activities, accept responsibility for them and to disclose the results in a transparent manner.” Implied in this definition is the ability to verify tasks are completed as expected, on time, efficiently and per company policy. For fleet managers, this can only be accomplished through real-time GPS tracking devices on all vehicles.

After all, it is an established fact that drivers that know they are being monitored by such systems are less likely to make unnecessary detours or stops for personal reasons, may avoid spending unnecessary time at job sites or avoid idling the engine while filling out paperwork in the vehicle.

But accountability is not about discovering what a driver is doing “wrong,” it is actually more about what the driver is doing right. Through GPS tracking, drivers can take more ownership for their jobs, have more clarity of tasks and results, can self-correct, improve and do not have to be micromanaged. 

Advanced Tracking Technologies’ GPS tracking systems are used in the construction industry to provide employees and owners accountability and peace of mind. 

Even well intentioned drivers may discover that there are areas of improvement and efficiencies that could make them more productive. 

There are also indirect benefits as well. When all drivers are monitored, those not pulling their weight are more easily identified so faster, more productive employees do not have to pick up the slack with extra deliveries or service visits.

Finally, with greater accountability, higher performing employees are more likely to be recognized and rewarded based on verifiable performance.

So, with a host of benefits for the employee, fleet managers that have avoided the “leap” to GPS tracking are missing out on a win-win scenario. After all, more accountable drivers lead to greater efficiency overall, which means increased profits. It’s an argument that is hard to deny, particularly as GPS tracking continues to improve while the cost of entry plummets.

Holding Drivers to a Higher Standard

Although GPS trackers have been around for some time, advances in the technology allows for more real-time tracking and simplified reporting. Fleet managers, after all, don’t want to spend all day on their computers sifting through complex analytical data. Instead, they want simplified, easy to read reports that summarize what they need to know. Fortunately, such systems exist today and at rates less than $20 per vehicle.

The advanced units today allow real-time and historical tracking of each vehicle in a fleet. This allows dispatchers to assign the closest vehicle to a job, which expedites the service work or delivery and saves gas, labor, and vehicle wear-and-tear. It also allows historical routing analysis, which enables even greater routing efficiencies to be determined on an individual or fleet-wide basis.

Through GPS tracking, drivers can take more ownership for their jobs, have more clarity of tasks and results, can self-correct, improve and do not have to be micromanaged.  
 SAMSUNG DIGITAL CAMERA

However, the greatest improvements in fleet management occur when GPS tracking devices are used to hold drivers to a clear, unbiased standard to encourage better performance for the company and themselves.

Real Life Results

As an example, when Reilly Construction & Development implemented their first GPS tracking system last year, the Vero Beach, Florida-based residential and commercial construction company benefited from significant productivity gains and operational efficiencies.

The construction company has installed Shadow Tracker Vision III GPS tracking devices from Advanced Tracking Technologies (ATTI), a Houston, Texas-based designer and manufacturer of GPS tracking products, on two of their construction trucks. 

Compared with typical GPS tracking devices that may only update every few minutes,

the device provides real-time location updates every 10-seconds, as well as location, speed and idle time alerts if something is amiss. This data is transmitted via satellite and cellular networks to a smartphone or PC on a 24/7 basis.

With such accountability for how every minute of each day is spent, employees know they are always “on the clock”. This helps to eliminate frivolous or unnecessary stops during the workday, and decreases wasted time during a stop. 

“Now we know exactly where our vehicles and drivers are in real time,” says Sharon Arnold, Office and Assistant Project Manager at Reilly Construction & Development. “We can spot check our drivers to make sure they are where they are supposed to be and not at unauthorized places because some people will take advantage. That has saved us a few thousand dollars in salary alone. The system more than pays for itself in enhanced productivity.”

On the plus side for employees, the use of such GPS tracking systems helps verify on-time arrival at customer sites. And automated reporting such as that provided by the ATTI system can virtually eliminate the reporting burden for employee and employer in regard to driving logs. Automated exception reporting can also flag potential issues that need to be corrected, such as excess vehicle mileage or idling.

“We are trying to work smarter, not harder,” says Arnold. “We are trying to make things simple and straight forward. With everything out in the open, people know what to expect.”

Increased Productivity, Reduced Fuel

Once drivers and the work crew know they are accountable for their actions, it is amazing how much more they will accomplish. Using such an approach with advanced GPS tracking commonly improves productivity 10 to 20 percent while reducing fuel costs 10 to 15 percent, as drivers start to pay attention to their driving and work habits throughout the day.

Indiana-based Gordon Plumbing Inc., which offers services ranging from small fixes to remodeling and construction, currently uses ATTI’s GPS tracking system on 54 vehicles, and has used three different tracking systems over the last decade.

“The ATTI system not only expedites job dispatching but also enhances accountability and profitability while reducing costs,” says Shannon Allen, Gordon Plumbing Service Coordinator. 

Allen points out that being able to access a vehicle’s position in real time means “our vehicles can reach customers very quickly when there are emergencies.” She adds, “If our drivers on the job need help from a tech specialist, we can immediately find one in their area and dispatch them to that address.”

According to Allen, the system provides one link for all the covered vehicles. “The GPS tracking system puts our vehicles on a map, so I can see all of them at once,” she says, noting that the view can be narrowed to any department or geographic area, as desired. “It is so accurate that it lets me see exactly where a vehicle is parked.”

Because the GPS system is automated, reports are delivered without anyone having to open software. In addition to the real time views of the activity taking place, next day reports are delivered by email, documenting everything that happened the day before. The reports can be customized, for example, to show how many drivers idled for more than 30 minutes or how many miles were put on a vehicle.

Allen emphasizes that the system can quickly spot driver habits that need correction, such as a driver stopping for five or 10 minutes between jobs several times a day. 

“With the GPS system, we are able to notice and point out that even five to 10 minutes stops between jobs each day adds up to a lot of lost productivity,” says Allen. She concludes, however, that her drivers are quite used to the system and even appreciate it when it proves that they are getting to and doing their jobs as required.

For a free demo, visit https://www.advantrack.com/free-demo/. For more information contact Advanced Tracking Technologies, 6001 Savoy Drive, Suite 301, Houston, TX 77036; visit www.advantrack.com; call 800-279-0035; email sales@advantrack.com. 

This feature appeared in the January 2020 issues of the ACP Magazines:

California Builder & Engineer, Construction, Construction Digest, Construction News, Constructioneer, Dixie Contractor, Michigan Contractor & Builder, Midwest Contractor, New England Construction, Pacific Builder & Engineer, Rocky Mountain Construction, Texas Contractor, Western Builder

Intelligent Compaction is the Key

By Jeff Winke

Long-lasting, Durable Surfaces Result From Quality Compaction

The most elemental meaning of the word “compaction,” is the exertion of force on something so that it becomes more dense.

In the realm of road construction, compaction is considered one of the most important processes in pavement and roadway surface construction. It is necessary in order to attain high quality and uniformity of pavement materials, which in turn better ensures the long-lasting performance of the road. 

It has been more than a few years since the term and method of “intelligent compaction” (IC) has become a given in discusions of paving. Today, it has become the norm – compaction is pretty much considered intelligent compaction.

IC refers to the compaction of road materials, such as soils, aggregate bases, or asphalt pavement materials, using modern vibratory rollers equipped with an integrated measurement system, an onboard computer reporting system, Global Positioning System (GPS) based mapping, and optional feedback control. IC rollers facilitate real-time compaction monitoring and timely adjustments to the compaction process by integrating measurement, documentation, and control systems. IC rollers also maintain a continuous record of color-coded plots, allowing the user to view plots of the precise location of the roller, the number of roller passes, and material stiffness measurements.

“Operators have told me that intelligent compaction takes the guessing game out of their rolling pattern,” said Daniel F. Brown, President of Phend & Brown, Inc., Milford, Indiana. “They no longer need to remember which utility power pole or mailbox they started or stopped at with their rolling pattern. Additionally, uniform pass coverage is assured because pass coverage is being measured and documented.”

The Background on IC

Back in 2011, the Federal Highway Association (FHWA) reported on a major three-year research project that was designed to verify that IC, which at the time had been considered “emerging technology,” was mature enough to be implemented in the real world. The intent of the project was to create the blueprint in the FHWA IC strategic plan. This study was under the Transportation Pooled Fund project, which included 12 participating state department of transportation: Georgia, Indiana, Kansas, Maryland, Minnesota, Mississippi, New York, North Dakota, Pennsylvania, Texas, Virginia, and Wisconsin.

The report’s Executive Summary states that the project “demonstrated tried-and-true Intelligent Compaction (IC) technologies through 16 field projects and open house activities, numerous meetings and training for State personnel and local earthwork/paving contractors, and assistance on the development of State IC specifications.”

The IC project’s key conclusions:

  • IC mapping of existing support layers is effective in identifying weak support areas for corrective actions prior to the compaction of the upper layers. 
  • With hot-mix asphalt (HMA) paving, IC tracking compaction roller passes and HMA surface temperatures can provide the necessary means to maintain a consistent rolling pattern within optimal ranges of temperatures for coverage of 100 percent of the construction area. 
  • IC technologies can be especially beneficial to maintain consistent rolling patterns under lower visibility conditions, such as night paving operations.

IC Technology Aids Productivity

IC technology, the report stated, will have profound influence on the responsibilities of various stages of pavement constructions and will eventually help produce better and more consistent pavement products. 

“We are currently running Topcon C-53 IC Systems on two Caterpillar CB-534 D XW Rollers, and two systems on Bomag BW190 AD Rollers,” stated Brown. “At the time of purchase, the C-53, which offers the GX-55 control box, was the newest technology available.

“We like that the technology provides for remote mobile access via Sitelink to allow process balance decisions to be based on real-time data for the entire paver/roller operation, which in turn ensures that optimal production rates and density values are consistently achieved.” 

Topcon Positioning Systems offers an IC system that is designed to track pass counts of multiple rollers or IC machines working on the same project. Through secure connectivity to Topcon’s global Sitelink3D service, each compactor not only performs its tasks, but also becomes part of the overall monitored project. 

“Each operator is not only able to see their own passes, but those made by other machines on-screen in real time,” Brown said. “And in real time, the paving superintendant, foreman, and general contractor personnel can also see what exactly is going on via the Sitelink platform. This ensures proper compaction from each machine and eliminates redundancy.” 

The IC system is designed to:

  • Leverage multiple integrated temperature sensors, so each compactor can achieve consistent results through constant feedback into the system.
  • Provide accurate pass counts, geographic locations of each run, as well as georeferenced task assignments and their completion via its GNSS technology.
  • Ensure that regulatory IC standards are being met by documenting surface stiffness values through its accelerometer.
  • Connect to the Sitelink3D Enterprise service which provides 24/7 access to project data, team collaboration, custom reporting, as well as standard export to Veta management and analysis software, which can provide additional customized information. 
  • Provide data to demonstrate specification compliance and confirm proper density claims.

“We’re using the Topcon C-53 IC System with a GX-75 control box on our 850 Series Sakai Oscillation/Vibration Paving Roller, which allows the machine operator to monitor the compaction pattern and the temperature as they’re working,” stated Sergio Muniz, Paving Superintendent with Payne & Dolan, Inc., Waukesha, Wisconsin, who acquired the system working through his local Topcon Solutions Store. “I like that I can jump onto my laptop and see the work being completed in real time and make certain we’re complying with the tough DOT state specifications.”

Muniz added: “We’re finding the Topcon system to be essential for our high-profile big jobs to ensure we remain on task and is instrumental for when we work at night. It also is proving handy for smaller parking-lot-type jobs as well.”

The key benefit of IC is greater control over the compaction results, which in turn provides better finished paved results. Compaction at its most elemental is the exertion of force on something so that it becomes more dense, while IC provides the technological means to ensure that compaction is performed consistently, thoroughly, and accurately. The goal is to achieve optimum densities that ensure adequate support, stability, and strength. Achieving these densities uniformly is key, and clearly IC aids this process.

This feature appeared in the January 2020 issues of the ACP Magazines:

California Builder & Engineer, Construction, Construction Digest, Construction News, Constructioneer, Dixie Contractor, Michigan Contractor & Builder, Midwest Contractor, New England Construction, Pacific Builder & Engineer, Rocky Mountain Construction, Texas Contractor, Western Builder