Winter is Dead, Long Live Summer May 2014 Editorial

Editorial Staff
Editorial Staff

I, for one, am glad winter is finally over. It took long enough to let spring finally emerge because in Michigan we had a couple of inches of snow in mid-April setting a record for number-of-inches in many areas of the state. This winter almost everyone in the country was a victim at one time or another.

Resulting road and infrastructure damage will be measured in the billions of dollars. Individuals will have racked up excessive auto repair costs, lost work days and higher-than-normal home-heating and electrical costs. The economic pain doesn’t stop here.

Virtually all construction suffered due to the cold and snow and the pain won’t dissipate with higher temperatures. Materials costs will increase due to shortages resulting from the cold.

It was a bad winter but it should be offset by an exceptional spring, summer and fall over the next seven or eight months. Or, will it…

According to Wells Fargo Economics Group:

Weather Effect has Largely Faded

Housing starts posted a second monthly gain in March, increasing 2.8 percent to a 946,000-unit pace. This report shows that while the housing recovery hit a snag in December and January due to weather, it is still on track. Although today’s gain is welcome, the reading was below consensus estimates. Moreover, permits fell 2.4 percent, but the decline was concentrated in
multifamily.

Single-Family Starts Rebound

Single-family starts increased 6.0 percent in March to a 635,000-unit pace, the second-straight monthly gain. The consecutive gains in single-family starts and increase in purchase applications should alleviate fears that the housing recovery has lost its luster. Wells Fargo expects single-family starts to increase 19 percent in 2014 and 18 percent in 2015. Multifamily starts fell 3.1 percent on the month to a 311,000 unit pace.

New Sales Plummet in March

New home sales dropped a more-than-expected, 14.5 percent in March, while forecasts were looking for a small pickup on the month. Weak builder sentiment and still-tight credit conditions continue to suggest sales activity will be challenged during home buying season. One bright spot was the jump in inventories, which reached its highest level since late 2010. Median home prices also rose more than 11 percent year to year.

Builder Confidence Remains Low

One tell-tale sign of the slower pace in new home sales activity is builder confidence. Sentiment has been stuck in a narrow band over the past three months, but remains below the key threshold of 50 where more builders see conditions as “good” rather than “poor.” Moreover, prospective buyer traffic also remained at a low level. We suspect weather is still playing a role in the tepid pace of sales activity, but reports in April and May will confirm.

According to American Road & Transportation Builders Association, (ARTBA) “Data from a new government report shows that if all the structurally deficient bridges in the United States were placed end-to-end, it would take you 25 hours driving 60 miles per hour to cross them. That’s like driving the 1,500 miles between Boston and Miami. And it’s a problem that’s close to home.

ARTBA will announce the list of the top 250 structurally deficient U.S. bridges, state rankings based on the number of deficient bridges and estimates to repair them, and a list of each state’s top 10 deficient bridges.”

This and other related information will be released after this issue goes to press. We will post the results online at site-kconstructionzone.com as soon as it is available and include it in next month’s issues.

Winter may be over but winter woes will probably be with us for some time to come. If the road situation was bad last year, it is considerably worse this year. And, don’t forget, the current Highway Bill is in the hands of Congress.