According to the recently released “Construction Outlook 2009: Spring Update,” published by McGraw-Hill Construction, not only are overall new-construction starts in 2009 down by 15 percent so far (totaling $463 billion), but residential construction will continue to drop throughout the year. The report projects that in 2009, home building will fall by as much as 31 percent, both in single-family (30 percent) and multifamily (31 percent) segments.
With the enactment of the federal “American Recovery and Reinvestment Act of 2009” earlier this year, the overall economy—including construction—is getting a boost. But economic conditions had already deteriorated significantly and continue to do so, though with less dramatic lows than expected prior to the stimulus.
“The construction industry is facing divergent forces in 2009,” said Robert Murray, McGraw-Hill Construction’s vice president of economic affairs, in an announcement of the data. “The economy has weakened substantially, and despite all the efforts last fall directed at thawing frozen credit markets, there’s yet to be any sign that lending conditions for construction have improved. On the plus side, the federal stimulus bill is now in place, which will provide quick support to public works this year.” Time will tell to what extent such measures benefit the construction industry. The complete “Construction Outlook 2009: Spring Update” report may be purchased from McGraw-Hill Construction.
Fresh statistics on new residential construction for March 2009 from the U.S. Census Bureau and the Department of Housing and Urban Development released April 16 also indicate a continued downward trend in housing permitting and starts. Current data show that building permits for single-family homes in March 2009 dropped 7.4 percent below the previous month’s permits and that single-family housing starts remained at 358,000, unchanged from starts in February. However, completions of single-family homes in March rose 5.0 percent over February’s completions.
Although the new-home construction situation still looks grim for builders across the board, home builders’ spirits seem to be buoyed by federal actions and the hope that the housing recession is nearing its lowest point. On April 15, the National Association of Home Builders released its latest NAHB/Wells Fargo Housing Market Index, which indicates that builder confidence in the market for new single-family homes increased by five points in April to an overall score of 14, reaching its highest point since October 2008 and achieving the largest one-month increase since May 2003.
“This is a very encouraging sign that we are at or near the bottom of the current housing depression,” said NAHB chief economist David Crowe when the data were released. Crowe cited lower home prices, more favorable mortgage rates, and the first-time home buyer tax credit of $8,000 as key drivers of improved sales in the upcoming prime selling season. He noted, however, that the continuing lack of access to financing for builder acquisition, development, and construction remains a problem.
“Restoring health to our nation’s economy will require a substantial housing recovery, and that recovery is contingent on breaking the logjam in AD&C lending that presents an ever-increasing obstacle for home builders,” Crowe said.
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