Tag Archive for 'residential construction'

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Wells Fargo Reports: Housing Starts Plunge in April as Weather Holds Back Activity

Wells_Fargo_Securities_logoAfter a blowout report in March, starts plunged 16.5 percent in April, with both single- and multifamily starts tumbling. Permits rose sharply, however, and builders sound downright giddy about sales prospects.

 April’s 16.5 percent plunge in housing starts is less alarming when paired with the 14.3 percent rise in permits reported that month. Inclement weather likely delayed some starts, which should produce a nice rebound in May.

 

Starts Tumbled Back Below Permits

 After spiking in March, multifamily starts plunged 38.9 percent in April and were responsible for most of the swing in overall starts. Multifamily permits rose nearly 40 percent in April.

Single-Family Starts Dip, But Builders Sound Giddy

 Single-family starts fell 2.1 percent in April, marking the second consecutive monthly drop. Starts had been running ahead of permits, however, so the drop was not a surprise. Permits for single-family homes rose 3.0 percent to a 617,000-unit pace.

 Builder confidence improved in May and the tone of recent builder conferences has been downright giddy. Demand is improving but lots, labor and materials are in short supply.

Housing Starts Housing Starts and Building Permmits Well Fargo Single and Multi 

Wells Fargo Economics Group Reports: New Home Sales Rebound in November

Wells_Fargo_Securities_logoNew home sales rose in November to a 377,000-unit pace, which is the highest level since April 2010. Gains were concentrated in the Northeast and South. The median price is up 14.9 percent over the past year.

New Home Sales Activity Shows Solid Gain

· New home sales rose more than expected in November to a 377,000-unit pace, from a downwardly revised 361,000-unit pace in October. Sales activity rose in the Northeast and South but tumbled in the Midwest and West. The South, which accounts for just over half the nation’s new home sales, posted a 21.1 percent gain in November. Regarding the Northeast, the impact of Hurricane Sandy is still difficult to measure.

Lean Inventories and Rising Prices Give Hope

· Sales activity for new home purchases through November 2o12 are running 19.4 percent ahead of their year-ago pace. The continued upward trend in new home sales is being boosted by lean inventories and rising home prices, which continues to drive improving builder sentiment.

· The months’ supply fell in November to 4.7 months, from a revised 4.9 months in October.

Wells Fargo Equipment Finance, Inc. Construction Quarterly Q4 Report Is Encouraging

{ad0490b3-831f-4b5d-862e-f81af193e57a}_425_CQHeaderFrom that report:

Unemployment. The October 2012 Employment Report from the U.S. Labor Department showed yet another gain of 147,000 private sector jobs (government employment was down 1,000). The unemployment rate now stands at 7.7%, a decrease of 0.2% from the previous month primarily due to a decrease in the number of individuals looking for work. The private sector continues to lead the job creation. The Wells Fargo Economics Group maintains its forecast of unemployment to remain at about 7.8% throughout 2013.

Real Gross Domestic Product (GDP). The U.S. economy improved at a much better rate than initially reported as the U.S. Department of Commerce revised its Q3-2012 GDP number up from 2.0% growth to 2.7%. Full year GDP growth for 2012 will likely come in at around 2.2% as companies continue investing in equipment and technologies but hold back on hiring. If the U.S. can avoid casting itself over the “fiscal cliff” and if Europe can outlast its prolonged credit crisis, the Wells Fargo Economics Group forecasts a rather lackluster full year GDP growth of 1.4% in 2013.

U.S. Non-Residential Construction. Private non-residential construction spending for October 2012 is up 10.7% compared to October 2011 due to increased spending in the power, manufacturing and commercial sectors. In contrast, public non- residential construction is down 1.0% from a year ago even as it eked out a gain of 0.8% compared to September 2012. State transportation budgets face continued strain and investment in highway and street construction was down 5.0% from a year ago.

Fuel prices. The price of gasoline declined steadily through October and November to a monthly national average of $3.44 per gallon, the lowest average since July. Even as drivers received a respite after a summer of near $4 per gallon fuel, these prices are still at record highs for this time of year. The average annual price of gas for 2012 ($3.63 per gallon) will be the most expensive on record and is 12 cents more than the current record high set last year. (Data source: AAA)

Housing. The residential housing market is one of the shining stars of the U.S. economy at present which may be a surprise given that in 2011, housing starts totaled about 610,000 units. Home values are slowly on the rise as are housing starts, which will total about 780,000 units in 2012. Mortgage rates are likely to remain near record lows and should con- tribute to housing starts that approach the 1 million unit mark in 2013.

Consumer Price Index. Retail pricing pressures eased somewhat during 2012 to about 2.2% compared to 3.1% in 2011. The Wells Fargo Economics Group forecast for overall inflation, which includes fuel and food, is expected to nudge up to 2.5% in 2013.

Producer Price Index. Wholesale prices moderated somewhat in 2012 only slightly to 2.3% following price increases of about 6.0% in 2011. For 2013, the Wells Fargo Economics Group is expecting wholesale pricing pressures to settle in at around 3.2%.

Interest rates. In an effort to promote growth, the U.S. Federal Reserve has signaled an intention to keep interest rates low for at least another year. The European debt crisis has extended a flight to safety that may keep yields on 10-year U.S. notes below 2.0% through 2013.

To view the full report click here.

ABC Reports: Construction Industry Unemployment Rate Drops to 12.8 Percent in June

“The employment expansion in nonresidential construction is, at least in part, a reflection of the way the economy finished last year, which was on a relative strong note.” —ABC Chief Economist Anirban Basu.

 

With the addition of 2,000 jobs last month, the nation’s construction industry unemployment rate fell to 12.8 percent in June, down from 14.2 percent in May, according to the July 6 employment report by the U.S. Labor Department. One year ago, the construction unemployment rate was 15.6 percent.

The number of unemployed construction workers now stands at 1.04 million, down from 1.32 million a year ago. However, much of this improvement is attributable to a decline in the size of the construction workforce, which now totals 8.12 million people, down from more than 8.44 million people a year ago.

June’s construction employment gains were primarily the result of a 10,000 job increase among specialty trades contractors. Employment in the specialty trades contractor segment is up 15,900 jobs, or by 0.5 percent, on a year-over-year basis. Nonresidential specialty trades contractors added 7,600 jobs for the month and have gained 14,100 jobs, or 1 percent, during the past year.

In contrast, nonresidential building construction employment declined by 1,000 last month to 657,500. Employment in this category is still higher relative to a year ago by 4,300 jobs, or 0.7 percent. Heavy and civil engineering construction employment decreased by 2,000 jobs for the month and has fallen by 1,800 jobs, or 0.2 percent, from the same time last year.

Residential building construction employment slipped by 5,900 jobs last month and is down by 5,200 jobs compared to a year ago. Employment in this sector now stands at 556,600.

Overall, the nation added 80,000 jobs in June and 1.8 million jobs during the past twelve months. The private sector added 84,000 jobs, while the government sector lost 4,000 jobs. June represents the 28th consecutive month of private sector job growth in the United States. However, the unemployment rate remained unchanged for the month at 8.2 percent, down from 9.1 percent in June 2011.

Analysis

“Today’s employment report is a bit of good news for the construction industry, but is widely viewed as disappointing,” said Associated Builders and Contractors Chief Economist Anirban Basu. “During the first three months of this year, the nation added 226,000 monthly jobs on average. During the past three months, the average monthly gain has been just 75,000 jobs.

“Many economic forecasters expect sluggish job growth during the balance of the summer and into the fall due to ongoing global economic slowing and various sources of uncertainty in the United States, including issues with respect to federal tax and budgetary policy,” Basu said.

“The employment expansion in nonresidential construction is, at least in part, a reflection of the way the economy finished last year, which was on a relative strong note,” said Basu. “Fourth quarter 2011 GDP growth was 3 percent.

“The associated increase in investor/developer confidence likely pushed many projects ahead, which helps explain the 10,000 increase in jobs among specialty trades contractors in June,” Basu said. “The economy today is likely expanding at less than 2 percent, consistent with expectations of flat nonresidential construction spending and suppressed hiring over the near-term.

“Given recent progress in Europe regarding sovereign debt and banking issues, as well as some recent signs of legislative progress in the United States, the level of economic uncertainty may abate somewhat over the near-term,” said Basu. “That would help reignite nonresidential construction’s recovery, though improvement in industry fortunes is unlikely to be immediate.”

To view the previous employment report, click here.

Wells Fargo Special Report: Housing Data Wrap-Up: April 2012

Home Sales Have A Little More Spring In Their Step

Early reports show that the critical spring home buying season has gotten off to its best start in five years. Sales of new single-family homes totaled 83,000 units during the first quarter, up 16 percent from a year ago, while sales of existing single-family homes rose 7.2 percent, marking the best combined pace for first quarter home sales since 2007. The rise in existing home sales has generated a little excitement, as news is spreading that homes sold outside the foreclosure process are often receiving multiple bids and selling above the asking price.

The sudden prevalence of multiple bids around the country appears to be the result of unseasonably mild winter weather, which brought buyers back into the market to a much greater degree than sellers. The first quarter is typically the slowest quarter of the year, with March being the only busy month. Inventories of existing homes have fallen to just a 6.3-months’ supply, and the inventory of unsold vacant homes has fallen by 353,000 units over the past year. Inventories of new homes continue to decline and are now at a paltry 144,000 units nationwide. Only about one-third of those homes are actually completed. With inventories dwindling, home prices have improved a bit. The Case-Shiller 20-City Home Price Index rose 0.15 percent in February, and the year-over-year decline has moderated to just 3.5 percent. CoreLogic’s price index shows prices declining 2.0 percent over the past year, with prices excluding distressed properties down just 0.8 percent.

The better news on sales and prices, along with near record high affordability and near record low mortgage rates, has encouraged builders to move forward with a few more projects. Starts of new single-family homes rose 16.7 percent during the first quarter, for a total of 104,600 units.

There is even more excitement in the apartment market. Starts of multifamily homes totaled 45,000 units during the first quarter, up 25.3 percent from one year ago, marking the strongest pace for multifamily construction in four years. An improving rental market is driving construction. The latest data from Reis show the national apartment vacancy rates falling 1.3 percentage points over the past year to 4.9 percent and effective rents rising 2.8 percent. Demand for rental units is exceptionally strong. The Census Bureau’s latest housing vacancy rate data show a net increase of 1.5 million occupied rental units over the past year and a 491,000 drop in the number of owner-occupied dwellings. Renters now account for 34.6 percent of the occupied housing stock, the highest proportion in 16 years.

Plenty of Challenges Still Await

To be certain, plenty of problems remain. One reason why existing inventories are so low is because many homeowners are unwilling or unable to put their homes on the market at today’s low prices. The pickup in demand that we have seen recently and the apparent stabilization in home prices is welcome, but is no reason to get carried away. We are not on the cusp of another major boom. Some of the strength in the first quarter was likely pulled forward by unseasonably mild weather in the normally slow months of January and February. Likewise, some of the apparent stability in home prices appears to be due to a slowdown in foreclosure sales and a slight pickup in short sales, which tend to sell at a smaller discount than foreclosures. Foreclosure starts picked up sharply since a settlement was reached regarding foreclosure practices at several major mortgage servicers, and we should see more foreclosure sales later this year.

Even with these caveats, there is no denying that there is real improvement taking place. New and existing home sales have picked up across the country. Pending home sales rose 4.1 percent in March, and February’s previously reported 0.5 percent drop was revised up to a 0.4 percent increase. Consumer confidence surveys and surveys of renters not renewing their leases also point to stronger home sales in coming months. We have slightly raised our forecast for new home sales and new home construction based on the solid gains in sales during the first quarter.

Builders are moving cautiously and are still tending to focus on projects in which lots can be purchased inexpensively, effectively competing against foreclosures and lower-priced existing homes. For the most part, builders are concentrating on smaller homes in submarkets near key employment centers. They are largely avoiding the outer suburbs, in which building was strongest near the end of the boom. Gains are strongest in markets benefitting from the oil and gas boom, namely Houston, where single-family housing permits were up 23.1 percent from the first quarter of last year. Single-family permits have jumped 51.5 percent in Denver over the past year to 1,043 units and are up 24.6 percent in Oklahoma City and 16.1 percent in Dallas.

Activity is also picking up in some of the more overbuilt markets. Phoenix has seen single-family permits jump 54.4 percent over the past year to 2,505 units in the first quarter, and single-family permits are up 31.7 percent in Atlanta and 64.5 percent in Miami-Fort Lauderdale-Pompano Beach. Single family permits are also up close to 50 percent in Orlando over the past year and are up 70 percent in Charlotte to 1,495 units in the first quarter. All of these markets have seen land prices drop significantly. Apartment construction is also up sharply across the country, particularly in rapidly growing markets such as Austin, where multifamily permits are up more than 500 percent over the past year to 3,139 units in the first quarter.

This report is available on wellsfargo.com/economics and on Bloomberg WFEC