A design and construction industry recovery may not be too far distant, if recent indicators are drawing an accurate picture. The latest U.S. Census Bureau new residential construction data, as well as the most recent American Institute of Architects (AIA) Architecture Billings Index (ABI), have shown sustained improvements in the past few months, and economists’ housing industry forecasts are mostly sanguine.
After two months of modest improvements, the AIA’s ABI increased once again in April with a 2.4-point gain over March for a score of 48.5. While this reflects a continuation of the overall decline in demand for architecture services, the AIA notes that it also is the highest ABI since January 2008. Inquiries for new projects increased again, as well, scoring 59.6, up from March’s score of 58.5.
Still, don’t expect a swift recovery. “The construction industry tends to lag behind the overall economy as conditions improve following a recession,” says Scott Frank, AIA’s director of media relations. “The three-month uptick is very encouraging for the design and construction industries, but recovery is happening at a slow pace.”
“Tight credit continues to be a problem, particularly for smaller architecture firms. We have heard reports of countless projects being shelved indefinitely or canceled outright because banks are not lending for real estate projects,” Frank says. “If that persists, then it could jeopardize a full recovery.”
The U.S. Census Bureau’s April New Residential Construction Report also shows some continued improvements, although permits for all types of housing declined significantly.
Permits for privately owned housing units fell to a seasonally adjusted annual rate of 606,000, 11.5 percent below March authorizations, and permits for single-family units declined 10.7 percent to a rate of 484,000 units. Authorizations for units in buildings of five or more units fell 14.9 percent from March.
Overall starts of privately owned housing units rose 5.8 percent to a seasonally adjusted annual rate of 672,000. Single-family housing starts increased by 10.2 percent from March to a rate of 593,000, but starts of units in buildings with five or more units fell 23.6 percent. Completions for all housing types increased in April, with overall privately owned housing unit completions going up by 19.2 percent to a rate of 769,000. Single-family housing completions increased 14.6 percent to a rate of 564,000 and completions of units in buildings of five or more units jumped 33.3 percent from March.
Although there are several ways the housing recovery could be derailed, the economy finally appears to be getting back on its feet, according to economists at the National Association of Home Builders’ (NAHB) Construction Forecast Conference in May. But it’s important to remember that the design and construction industries didn’t go bust and bottom out overnight, and they certainly will not bounce back overnight, either. Economists predict it will take nearly three years to return to normal and even longer to reach a full recovery.
