Construction Trends

January 2007

Construction in 2007: Facing a Tough Year
By Dave Meyer
2007 National Chairman
Associated Builders and Contractors


After years of near-record growth, the construction industry is faced with a slowdown. The U.S. housing market began a correction in 2006, and residential construction experienced a steady decline throughout the year. For 2007, industry experts predict that total construction will decrease approximately 1 percent, buoyed only by the commercial and industrial sectors.

Despite predictions of slowed growth, the construction industry needs skilled craft professionals more than ever. In 2006, workforce shortages became a harsh reality for much of the construction industry, and the crisis is only expected to worsen in the new year.

According to the U.S. Bureau of Labor Statistics, nearly 1 million new jobs will be created for employees in the skilled construction trades by 2014. The "Baby Boom” generation is preparing to retire, and the U.S. economy is expected to continue growing in 2007. When combined with the increased workforce demand in the Gulf Coast region, where cleanup from the devastating 2005 hurricane season is coming to a close and reconstruction has begun, the workforce crisis looks to be the most pressing issue facing the construction industry in 2007.

The ongoing challenge of rebuilding the Gulf Coast will have a far-reaching impact on other areas of the building industry as well. The sheer scale of the effort will likely have a direct effect on the price and availability of construction-related materials. In recent years, materials prices have been unstable, and shortages have persisted in some regions. Combined with steady demand from booming building industries in foreign countries, including China, potential price spikes and spot shortages pose a real threat to the U.S. construction industry in 2007.

Another major issue that impacted the construction industry in 2006 and that will remain a major issue in 2007 is the debate over comprehensive immigration reform. Last year, the U.S. Senate and the U.S. House of Representatives approved two very different bills that would tighten border security, crack down on undocumented workers and establish a much-needed guest worker program. In 2007, the industry must work with congressional officials to ensure that conferees negotiating compromise immigration reform legislation craft sensible measures that allow U.S. industries to meet their workforce needs while maintaining national security and continuing to grow the U.S. economy.

The rising cost of health care also poses a significant challenge for the construction industry in 2007. The vast majority of construction firms are small businesses that employ fewer than 20 people. The cost of health care coverage has increased rapidly in recent years, and many of these small businesses have been forced to increase their employees’ deductibles and co-payments. It is imperative that the construction industry continue to work with congressional leaders in 2007 to develop and implement effective solutions that provide America’s small construction firms with access to quality, affordable health care options.

While there are a number of tough challenges facing the building industry in 2007, there are some bright spots. The commercial sector showed strong growth in 2006, and industry experts predict that this growth will continue in 2007. New technologies continue to help builders bring projects in on-time and under-budget, and the nation’s economy continues to expand.

My association, Associated Builders and Contractors (ABC), will work with its industry partners, 79 chapters and more than 23,000 members to address the significant challenges that face the building industry in the year ahead. As one of the leading voices in the construction industry, ABC will strive to ensure that 2007 is a successful, prosperous year for contractors and craft professionals nationwide.

David Meyer, founding partner of The Meyer Companies, Lee’s Summit, Mo., is the 2007 National Chairman of Associated Builders and Contractors. The Meyer Companies is a design/build construction firm offering services to commercial, industrial and institutional users in and around Kansas City, Mo. David and Roger Meyer founded the company in 1977 and it continues to be family owned and operated.

Builder Confidence Holding Steady in December
Just before the holidays, as we were heading to press, builders of new single-family homes continued to believe that the worst of the downswing in home buying was behind them, according to the National Association of Home Builders/Wells Fargo Housing Market Index for December. At 32 for the present month, the overall HMI is down a single point from November but remains above the recent low of 30 in September.

"This was the third consecutive month in which builder expectations for sales over the upcoming six-month period have improved, and it’s a good sign of things to come in the new year,” said NAHB President David Pressly, a home builder from Statesville, N.C.

"The HMI has come off September’s low point, and other recent indicators confirm that buying conditions have improved and that demand is stabilizing—including improvements in measures of housing affordability, strengthening consumer assessments of home buying conditions and an upswing in applications for mortgages to buy homes,” said NAHB Chief Economist David Seiders. "Builders sense that the tide is turning in terms of buyer demand for their product and are feeling somewhat better about the prospects for home sales.”

Seiders noted that the recent stabilization of home buyer demand largely reflects reductions in mortgage interest rates since mid-year, the retreat of energy prices from record highs and maintenance of solid growth in employment and household income. Reductions in home prices and widespread sales incentives offered by builders also have helped to buoy buyer demand.

Derived from a monthly survey that NAHB has been conducting for 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as either "good,” "fair” or "poor.” The survey also asks builders to rate traffic of prospective buyers as either "high to very high,” "average” or "low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.

The only component index to register a decline in December was the one measuring traffic of prospective buyers which, after a three-point jump last month, returned to its October level of 23. The component gauging current single-family home sales remained even at 33, up slightly from its recent low, while the component gauging sales expectations for the next six months rose three points to 48—its third consecutive monthly gain.

Regionally, the HMI posted the biggest gain this time around in the Midwest, which has shown the greatest weakness in this measure for many months. That region posted a 7-point gain to 22 on the confidence scale, while the Northeast was unchanged at 37, the South dropped a point to 39 and the West declined four points to 31.

OSHA Unveils Hurricane Recovery and Response Work eMatrix
Employers and employees involved in hurricane cleanup and recovery efforts will benefit from a new Web-based resource, Hurricane eMatrix: Hazard Exposure and Risk Assessment Matrix for Hurricane Response and Recovery Work, unveiled Dec. 14., 2006, by the Occupational Safety and Health Administration.

"This is an important new tool to help educate employees and employers on how to address the most common and significant hazards that they may encounter during hurricane response and recovery work,” said Assistant Secretary of Labor for Occupational Safety and Health Edwin G. Foulke Jr. "It provides practical information to employers so they can better assess risks and choose the appropriate control measures, work practices, personal protective equipment and training to protect their employees working in hurricane-impacted areas.”

Response and recovery work encompasses a range of specific tasks and operations that can present serious occupational safety and health hazards to employees. The Hurricane eMatrix is a tool that incorporates occupational hazards information, observations, recommendations and data that OSHA gathered and distributed during its response effort to hurricanes Katrina, Rita and Wilma.

The eMatrix offers users access to general recommendations, sampling and monitoring data, and employer/employee responsibilities applicable for any employers conducting response and recovery operations after a disaster. It also features 29 individual task- and operation-specific activity sheets that help employers evaluate hazards and provides guidance on reducing employee exposures during disaster operations.

Visit www.osha.gov to learn more.

Dryvit Wins 2006 ACE Award
Dryvit Systems, Inc., headquartered in West Warwick, R.I., has won first place for the second consecutive year, in the EIF Systems & Stucco category of Architecture Magazine’s 2006 Architect’s Choice for Excellence Awards.

"We are thrilled to have earned such an esteemed distinction by architects for the second year in a row,” said Tony Stall, vice president of marketing for Dryvit.

Architecture Magazine selects winners based on the responses of readers to a series of questions about the performance of different brands in various construction categories. Dryvit was selected the leading brand in the EIFS and stucco category for product consistency and reliability based on reader response, for the second consecutive year.

BASF Awarded for Innovative, Energy-Efficient Home
On Nov. 29, 2006, BASF – The Chemical Company, with headquarters in Florham Park, N.J., received a 2006 Leadership in Responsible Land Use Award from the Northern New Jersey District Council of the Urban Land Institute, a non-profit organization that promotes sustainable design. The award is given to leaders in both the public and private sectors who demonstrate excellence in real estate planning and development. BASF was recognized for its Near-Zero Energy Home in Paterson, N.J., a showcase house for energy-efficient design.

The BASF house achieved a 94.5 out of 100 points on the Energy Star® scale, making it one of the most energy-efficient homes in New Jersey history. Not only does the home save energy, it produces energy, as well. That means on many days, the electricity meter moves backward allowing the homeowners to sell the excess energy back to the utility company.

Completed in April, the project’s accolades also include a Gold rating from the U.S. Green Building Council (Platinum pending); a 94.5 HERS score by Energy Star® and Fortified for Safer Living® Certification, The New Jersey Clean Energy Award and The Governor’s Environmental Excellence Award.

The BASF Near-Zero Energy Home is part of the BASF Better Home, Better Planet Initiative aimed at educating the building community and general public about sustainable design.

People & Companies In the News
Temple-Inland®, Diboll, Texas, has announced that its FiberBrace® high-performance structural sheathing is now approved by Underwriters Laboratories as a wall assembly component for multifamily and commercial wall systems requiring a one-hour fire rating.

During an ASTM E119 test, a full-scale wall section constructed in accordance with UL assembly U356, using FiberBrace as the exterior sheathing, successfully passed the one-hour fire test. A second wall, constructed using a screwed, horizontal application of the interior gypsum wallboard and FiberBrace exterior sheathing, also passed the one-hour fire test.

These results are being added to UL assembly U356 specifications and will be the first UL-approval of this fire-rated assembly using a fiberboard structural sheathing product. Also, this is the first version of this assembly approved with horizontally applied gypsum wallboard on the interior. The final description will include the use of 9- and 10-foot lengths of FiberBrace structural sheathing for 9- and10-foot walls without horizontal blocking. Currently, other sheathings are specified as 4-by-8-foot sheets requiring horizontal blocking on all seams.

SKIL, Mt. Prospect, Ill., has launched it redesigned Web site, www.skiltools.com, serving the U.S. and Canadian markets. The new site is designed to help power tool users achieve home project success.

Eric Luftig has joined Nordson Corporation, Duluth, Ga., as marketing manager for the Adhesive Systems Group.

As marketing manager, Luftig will be responsible for developing and managing marketing efforts for the Packaging and Product Assembly business group, as well as leading efforts to identify and capitalize on trends in new and existing global markets. He also will oversee domestic marketing functions, including marketing communications, pricing, training and trade show support.

Most recently, Luftig was global marketing manager for General Electric (GE) Silicones where he led strategic efforts to assess, validate and capture growth opportunities in the healthcare industry.

Niles Expanded Metals, Niles, Ohio, has hired Keith Unger as its network administrator. Unger will be responsible for all the corporate computer networks, software and server support. He comes to Niles Expanded with computer technical experience in software designing, software installation, DOS programming and hardware maintenance.

Negwer Materials Inc., Cape Girardeau, Mo., has added Amy Reinagel as an inside sales representative in its southeast Missouri office.

Reinagel currently is pursuing a bachelor’s degree in criminal justice from Southeast Missouri State University. She previously worked as an assistant branch manager for Household Finance.

Milwaukee Electric Tool Corporation has appointed Steven P. Richman as president.

Richman will be responsible for all facets of the business as it relates to the Milwaukee brand. He will be based at Milwaukee’s headquarters in Brookfield, Wis.

Richman has held a number of top-level management positions in the hardware and power tool industry. Most recently, he was most recently president and chief executive officer of Werner Co. He served as president and general manager, Skil and Bosch Power Tools from 2001 to 2005 and vice president of sales and marketing at Skil and Bosch from 1998 to 2001.

Lenox®, East Longmeadow, Mass., has named Pedro Caceres its new global vice president of operations. In this position, Caceres will be responsible for all manufacturing processes and support operations for the tool and band saw areas in support of LLenox’s global expansion.

Caceres joins Lenox after serving as senior vice president of operations, Hasbro Games, Hasbro Inc. in East Longmeadow, Mass. His background in operations includes vice president material supply chain, Hasbro; director of operations, Hasbro Inc., Valencia, Spain, and director of logistics, Hasbro Inc., Valencia.

Graco Inc., Minneapolis, has named Max Baumgartner director of sales and marketing for high performance coatings and foam. Baumgartner will be responsible for leading Graco’s worldwide high performance coatings and spray foam business.

Baumgartner has more than 12 years of sales and management experience with Graco, most recently as a regional sales manager for the Contractor Equipment Division.

Increasing current production capacity by 23 percent, Fabcon, headquartered in Savage, Minn., has installed four new 12-foot wide beds in its Minnesota, Indiana, Ohio and Pennsylvania facilities. In contrast to Fabcon’s rolling beds that are 8 feet wide, the new, wider beds are capable of producing panels up to 12 feet wide, and 13 1/2 feet wide in its Pennsylvania facility. Wider beds are at full production in all of the facilities.

Dryvit Systems, Inc., headquartered in West Warwick, R.I., has announced that the company’s Sand Springs, Okla., manufacturing plant has received ISO14001:2004 certification. This is the first step in the company’s plan to achieve ISO14001-certification for each of its five North American manufacturing facilities by the end of 2007.

Michele Dunlap has joined the Construction Management Association of America as director of certification. She will oversee the Certified Construction Manager program administered by the Construction Manager Certification Institute.

Prior to joining CMAA Dunlap was with the National Institute for Certification in Engineering Technologies, where she was certification program developer.