February Construction Holds Steady
At a seasonally adjusted annual rate of $573.0 billion, new construction starts in February were essentially unchanged from the previous month, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. Residential building continued at a healthy pace and public works rebounded from a weak January. However, nonresidential building in February lost momentum. For the first two months of 2005, total construction on an unadjusted basis came to $78.9 billion, basically the same amount reported during the first two months of 2004.
February’s data produced a 173 reading for the Dodge Index (1996=100), unchanged from a revised 173 for January. The Dodge Index averaged 179 during the latter half of 2004, so compared to recent months new construction starts have experienced a modest slowdown.
Residential building in February increased 2 percent to $347.2 billion (annual rate). Single-family housing advanced 3 percent, while multifamily housing was unchanged from the previous month.
During February, the cost of financing remained very supportive for single-family housing, as the 30-year fixed mortgage rate slipped to 5.6 percent following January’s 5.7 percent. However, in March long-term interest rates began to move upward, with the 30-year fixed rate reaching 6.0 percent toward the end of the month.
Continuing the trend of recent months, multifamily housing in February was helped by a large volume of condominium work. February included the start of major condominium projects in Punta Gorda, Fla. ($183 million), New York City ($135 million), Mount Pleasant, S.C. ($91 million), Las Vegas NV ($65 million), and Fort Lauderdale, Fla. ($55 million).
By region, residential building in February registered this pattern compared to the previous month: the Midwest, up 11 percent; the Northeast, up 2 percent; the South Central and West, each up 1 percent; and the South Atlantic, unchanged.
Nonresidential building in February fell 12 percent to $128.0 billion (annual rate). Reduced contracting was reported for stores, down 7 percent; offices, down 10 percent; and warehouses, down 26 percent. Manufacturing plant construction plunged 59 percent from an exceptionally strong January that included the start of a large semiconductor plant in Texas. The institutional side of the nonresidential market included weakness for churches, down 10 percent; healthcare facilities, down 20 percent; amusement-related projects, down 26 percent; and public buildings, down 44 percent.
There were a few nonresidential structure types that registered growth in February. Educational buildings, the largest nonresidential category by dollar volume, increased 8 percent. Major projects reaching the groundbreaking stage in February included a $125 million research facility in New York City and an $80 million high school in Virginia. Hotel construction in February grew 11 percent, showing modest improvement after the low amounts of the previous two months. Transportation terminal work improved 36 percent over a very subdued January, helped by the start of two major renovation projects for subway and train terminals in New York City, together totaling $78 million.
On an unadjusted basis, the no change for total construction in 2005’s January–February period was due to this pattern by sector, relative to last year: residential building, up 5 percent; nonbuilding construction, up 9 percent; and nonresidential building, down 15 percent.
By geography, total construction performed as follows in 2005’s first two months: the South Central, up 11 percent; the South Atlantic, up 2 percent; the West and Northeast, each steady with the same period of 2004; and the Midwest, down 15 percent.