Tag Archive for 'residential construction'

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Wells Fargo Reports: Pending Home Sales Rise in November

Wells_Fargo_Securities_logoThe pending home sales index rose 0.8 percent in November to 104.8, which is slightly above its average for the past six months. Pending sales rose in the South, Northeast and West but fell slightly in the Midwest.

Stronger Pending Home Sales

 Pending home sales rose solidly in November, with the overall index rising 0.8 percent to 104.8. The pending home sales index has bounced around in recent months and has averaged 104.5 over the past six months.

 Any reading above 100 is a generally positive sign for existing home sales, which tend to lead pending home sales by about two months.

Sales Have Picked Up in the South

 Pending home sales rose 1.4 percent in the Northeast, 1.3 percent in the South and 0.4 percent in the West. Pending sales fell 0.4 percent in the Midwest, continuing a long string of declines.

 On a year-to-year basis sales are up the most in the South, where they have risen 3.7 percent. The Northeast and West are up 2.8 and 2.3 percent, respectively; while pending sales in the Midwest have fallen 3.3 percent over the past year.

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Wells Fargo Reports: New Home Sales Unexpectedly Eke Out a Modest Gain

Wells_Fargo_Securities_logo Following August’s outsized gain, new home sales rose a modest 0.2 percent in September to a 467,000-unit pace. However, sales in the previous three months were downwardly revised. Inventories remain low. New Home Sales Post Upside Surprise

 New home sales rose 0.2 percent in September, marking the second-straight monthly gain. Although the level is largely unchanged over the past two months, downward revisions to data in the previous three months dampens the excitement over the upward surprise. In fact, July data was revised from an increase to a decline of 1.2 percent. Revisions on a regional basis show much of the pullback was in the West and South.

Mixed Messages in New Home Sales Activity

 Median and average prices for a new home dropped during the month. Over the past year, the median price of a home fell 4.0 percent, while the average price was down 2.6 percent.

 The NAHB/Wells Fargo Housing Market Index fell 5 points to 54 in October after rising in four consecutive months. Although all three components of the index declined, current sales and prospective buyer traffic made the largest dent.

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Nonresidential Construction Employment Declines In December

CEU2“It is discouraging to observe losses in momentum in both the broader economy and in nonresidential construction; however construction-specific and economy-wide employment data are likely to improve in the months ahead.”—ABC Chief Economist Anirban Basu.

Employment-January2014National construction employment decreased by 16,000 jobs in December, according to a Jan. 10 report by the U.S. Department of Labor. Nonresidential construction registered the bulk of job losses, contributing 88.1 percent of total construction industry job loss and losing 14,100 positions on a monthly basis.

The national construction unemployment rate grew to 11.4 percent on a non-seasonally adjusted basis compared to 8.6 percent in November and 13.5 percent one year ago.

“It is discouraging to observe losses in momentum in both the broader economy and in nonresidential construction; however construction-specific and economy-wide employment data are likely to improve in the months ahead,” said Associated Builders and Contractors Chief Economist Anirban Basu.

Across all industries, the nation added 74,000 jobs in December, with the private sector gaining 87,000 jobs and the public sector losing 13,000 jobs. According to the Bureau of Labor Statistics’ household survey, the national unemployment rate fell from 7 percent in November to 6.7 percent in December—the lowest unemployment rate since October 2008. Unfortunately, the unemployment decline is largely due to the labor force participation rate dipping back to its cyclical October 2013 low of 62.8 percent. Labor force participation is now at its lowest rate since March 1978.

“Compounding the gloomy jobs number and the historically low labor participation rate, long-term unemployment reached 3.9 million, or 37.7 percent of the labor force,” Basu said. “While this is below the post-recession peak, it is still the higher than at any other time in the past 60 years.

“A vast majority of the jobs added in December originated in low-wage sectors,” said Basu. “Leisure and hospitality, retail trade, and temporary help services accounted for 104,700 new jobs, or 141 percent of the monthly gain. Today’s jobs report shows that the U.S. economy is not quite ready to take off.”

Nonresidential building construction employment fell by 1,200 jobs for the month but is up by 10,000 jobs (1.5 percent) since December 2012.

Residential building construction employment rose by 4,800 jobs in December and is up by 26,800 jobs (4.7 percent) on an annual basis.

Nonresidential specialty trade contractors lost 12,900 jobs for the month, but employment is up by 11,600 jobs (0.5 percent) from the same time last year.

Residential specialty trade contractors gained 1,400 jobs in December and have added 73,000 jobs (4.9 percent) from December 2012.

Heavy and civil engineering construction lost 8,800 jobs in December, but segment job totals are up by 500 (0.1 percent) on a year-over-year basis.

To view the previous Employment report, click here.

Wells Fargo Reports: Construction Spending Posts Another Gain in July

Wells_Fargo_Securities_logoConstruction spending rose 0.6 percent in July, which shows consistent improvement. While private residential and nonresidential spending increased on the month, public outlays were down 0.3 percent. Third Quarter Off to a Good Start 

Construction outlays rose 0.6 percent in July to a $900.8 billion annualized pace. Previous months’ data were also solidly upwardly revised. Further confirming upward momentum in the housing market, private residential spending was up 0.6 percent and has posted positive gains since October 2012. Digging into the details of private residential, gains were broad-based with single-family, multifamily and home improvement all increasing on10-Year Treasury Yield the month. Another encouraging component of the report was the gain in private nonresidential, which rebounded from a decline in June. Private nonresidential rose 1.3 percent in July. However, public spending remained weak due to a 0.4 percent decline in state and local outlays. Federal spending rose 1.1 percent in July.

Single-Family Outlays Remain Solid

Gains in private residential spending continue to reaffirm strength in the housing market. Builder sentiment remains solid and has shown consistent increases over the past four months. The level is now the highest since late 2005, with more builders seeing conditions as “good” than “poor”. That said, other monthly housing market indicators appear to be at odds with construction spending and sentiment. Single-family housing starts and permits both declined in July, and new home sales plunged on the month. We suspect that recent weakness in 10-Year Treasury Yieldstarts and new home sales activity is only temporary and not the beginning of a trend. Indeed, while some of the slowdown on the month can be blamed by the rapid increase in mortgage rates, we suspect that extremely damp weather in the South attributed to some of the weakness in new home sales activity. With the housing recovery continuing to be driven by fundamentals, we expect further gains in single-family outlays in the coming months.

Multifamily spending has also seen a string of positive gains. The apartment vacancy rate is now at its lowest level in more than a decade at 4.3 percent, and demand remains fairly robust across the country. Deliveries are expected to pick up in the coming quarters and activity should remain solid.

Nonresidential Construction Outlays Improve10-Year Treasury Yield

Private nonresidential outlays have been somewhat of a moving target in recent quarters with revisions quite sizeable. At last, July’s revision to previous months’ data suggest structures will contribute a little more to real GDP growth in the second quarter, all things equal. The July report also suggests that the third quarter is off to a good start. Lodging, commercial and power were some of the largest contributors to the headline. Looking ahead, architectural billings, which typically lead construction spending by about a year, posted its third monthly increase in July.

Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

Wells Fargo Reports:Housing starts fell unexpectedly in June to an 836,000-unit pace

 

Wells_Fargo_Securities_logoBy Mark Vitner, Senior Economist and Anika R. Kahn, Senior Economist

We suspect that rain was a key factor in recent weakness, which means that starts will be more impacted than permits. Indeed, single-family permits increased 0.6 percent, which is the third straight monthly gain. Another important point to make is that the level of permits is running ahead of starts, which suggests a ramp-up in activity is in the cards. Moreover, single-family units under construction show a more steady progression and have increased since the beginning of the year. Single-family units under construction are up 19.8 percent over the past year and increased 1.6 percent in June. Multifamily units under construction are up 38.2 percent on a year-ago basis, which also speak to continued strength in this sector.Housing starts fell 9.9 percent in June, with the decline concentrated in the multifamily component. On a regional basis, single-family starts fell in the South, where rain was likely a factor.

Housing starts fell unexpectedly in June to an 836,000-unit pace. While weakness was broad-based, much of the decline was in the volatile multifamily component, which fell 26.2 percent. Despite the monthly weakness, multifamily construction continues to be a boon for the economy, as renters shut out of the housing market due to tight lending standards continue to boost demand. In fact, multifamily starts are up 7.9 percent over the past year. Gains in apartment demand continue to be driven by the echo boomer generation and are expected to remain steady as many face extraordinary student loan debt. Moreover, the decline in multifamily appears to be a payback for the 28.2 percent jump in May. While the decline in multifamily in June is likely due to statistical noise, attention will be focused on the drop in single-family, which will raise questions whether the recovery remains sustainable.

Single-Family Decline is Much Ado About Nothing

Single-family starts fell 0.8 percent on the month, which is the third decline in four months. The decline seems to be at odds with recently reported builder sentiment. According to the Wells Fargo/ NAHB Builders’ Survey, builder confidence jumped 6 points in July, which is the third consecutive monthly increase. The increase brought the index to its highest level since January 2006. Builders are optimistic about present and future sales and buyer traffic continues to pick up. So, what is the disconnect in monthly data for sentiment versus starts?

Housing Outlook

We expect housing starts to increase to a sustainable pace of 990,000-units in 2013, with much of the gain in single-family. With single-family gaining solid footing, multifamily will begin to stabilize. We believe the trend in multifamily will continue, but starts should peak in the coming years. That said, real residential construction spending will continue to add to real GDP growth.10-Year Treasury Yield10-Year Treasury Yield10-Year Treasury Yield

Source: U.S. Department of Commerce and Wells Fargo Securities, LLC