Construction Trends

February 2007

Economic Outlook for 2007
Construction Deal, Inc., an Encino,Calif.–based online service that matches contractors to commercial and residential remodeling and construction projects, announced its economic outlook for the construction industry in 2007. After an extended housing boom, the real estate and building industries have slowed to a crawl over the past few quarters. Many experts are predicting the general economic outlook depends heavily on the short-term future of the housing market.

While the economy has remained steady, interest rates have been held in check, and unemployment is low, there are still concerns about the effects of the shaky housing market. The Federal Reserve fears an interest rate reduction, which could help real estate sales and boost consumer confidence, could spark runaway inflation. Consumers are worried, as home prices drop and equity diminishes, that they have less money to build, upgrade and relocate, or remodel their existing home.

Despite a healthy economy, consumer confidence is the biggest obstacle to the construction industry. As home prices jumped in the recent housing boom, personal incomes did not keep pace. Unemployment is low but fewer high-paying and quality jobs were added across the board within that same frame. Overall, the current U.S. workforce is more productive than previous generations. But a productive workforce can be bad news for the real estate market; fewer workers mean fewer houses are needed.

The Federal Reserve Chairman Ben Bernanke could be the deciding factor on how the U.S. economy performs over the next two years. Bernanke’s focus will likely remain on stifling inflation. If the housing market doesn’t show signs of life on its own, his policy could create a serious recession by the third and fourth quarters of 2007. If he lowers interest rates to stimulate the housing market, he’ll let the economy grow again and inflation could skyrocket. This could hurt the industry as higher prices on materials and labor could have the effect of lowering construction demand.

What has many experts concerned is the U.S. bond market. Bond market pricing has been showing a very high, very flat yield rate, with little or no difference between the 3-month T-Bill and the 10-year bond. Every time this has happened in the past (the early 1970s, 1975, the early 1980s, early 1990s and 2001), the economy has ground to a halt and we were mired in a recession.

In most areas, 2007 housing prices will not drop dramatically but will not appreciate for a minimum of two years. The question is, How many people will be hurt by a loss of equity in their homes or a rise in their interest rates? The rash of questionable mortgages and a rise in foreclosure rates will further dampen the housing market. Many jobs are tied to the real estate and construction industries and the loss of jobs could continue to push down economic growth. A low savings rate, higher debt, rising fuel costs and lowered home equity should keep consumer confidence bogged down. 2007 could be a rough year not only in construction and real estate, but for the country as a whole.

Commercial real estate is the brightest spot in the industry outlook. Commercial vacancy rates are at an all-time low and demand is growing. Office construction and multi-family unit construction should grow in 2007 and 2008. Retail unit demand might suffer if there is an overall economic recession. Because many apartments were converted to condominiums during the real estate boom, there should be an increased demand for apartment construction. If interest rates rise, it will become more affordable to rent than own.

Builder Confidence Continues to Improve
Continuing on an upward trend that began in the final quarter of 2006, builder confidence rose two points in January, according to the National Association of Home Builders/Wells Fargo Housing Market Index, released Jan. 17. The HMI increased from an upwardly revised 33 in December to 35 in January, its highest level since July 2006.

"Builders are responding to increased buyer interest at the end of 2006 and beginning of 2007,” said NAHB President David Pressly, a home builder from Statesville, N.C. "This bodes well for the upcoming spring buying season.”

"The same factors that were evident at the end of 2006 continue to hold true in today’s housing market—improving affordability measures, strengthening consumer assessments of home buying conditions and an upswing in applications for mortgages to buy homes,” said NAHB Chief Economist David Seiders. "Builders are starting to see that the worst is behind them and that buying conditions have improved to the point that greater optimism is warranted.”

Seiders added that the recent stabilization of home buyer demand largely reflects reductions in mortgage interest rates since mid-year, lower energy prices following what had been record highs and solid growth in employment and household income. Reductions in home prices and widespread sales incentives offered by builders also have helped resuscitate buyer demand.

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 higher than 50 indicates that more builders view sales conditions as good than poor.

Two out of three component indexes registered improvement in January. The index gauging current single-family home sales and the index gauging traffic of prospective buyers each gained three points, to 36 and 26 respectively, while the index gauging sales expectations for the next six months remained unchanged at 49.

Three out of four regions surveyed in the HMI posted gains in January. Two-point gains were registered in the Northeast, Midwest and South, to 39, 24 and 41, respectively. The HMI for the West remained unchanged from the previous month at 32.

Building Codes Available in Spanish
To help thousands of Spanish-speaking workers in the construction industry better understand building safety and fire prevention codes, the International Code Council published its 2003 International Codes in Spanish.

"Translating the codes to Spanish benefits public safety and provides a valuable customer service to the construction industry,” said International Code Council Chief Executive Officer Rick Weiland. "Many Hispanic workers speak English fluently. By translating the International Codes into Spanish, the thousands who don’t will be better able to use and apply building safety codes.”

Forty-seven states use the International Codes at the state or jurisdictional level. The District of Columbia, Puerto Rico and federal agencies also enforce one or more of the International Codes. The Department of Defense references the International Building Code for constructing military facilities, including those that house our troops, around the world and at home.

To purchase the new 2003 International Codes, Spanish Editions (Códigos Internacionales 2003), call (800) 786.4452.

ParexLahabra, Inc. Acquires Mer-Kote Products, Inc.
ParexLahabra, Inc. has acquired Mer-Kote Products, Inc., a Torrance, Calif.–based manufacturer of the Mer-Krete Systems™ line of waterproofing and crack isolation membranes, thin-set mortars, grouts, underlayments and decking products.

MerKote, established in 1971, has provided more than 500 million feet of exterior deck coatings and one billion square feet of waterproofing for ceramic tile and stone installations with their Mer-Krete Systems™ brand.

The acquisition of Mer-Kote will increase the product offerings of the ParexLahabra brands with the addition of products such as waterproofing and crack isolation membranes, floor preparation and tile installation products. Mer-Kote customers will benefit from an extended line of products with the ParexLahabra worldwide expertise in the powder products.

Mer-Krete and Mer-Ko will maintain the current management team including Tim McDonald as operations officer and Clint Anna, national sales manager.

ParexLahabra, Inc. is a wholly owned subsidiary of Parex Group, a division of Materis-France, with more than 35 manufacturing locations worldwide.

Bonsal American, National Gypsum Form Marketing Partnership
Bonsal American has announced that National Gypsum Company, headquartered in Charlotte, N.C., will be the company’s new supplier for cement backer board, an important component as a substrate for ceramic tile on walls, floors and countertops.

Bonsal American is one of the largest producers of packaged building material products in the United States, including cement mixes, concrete repair and restoration products and tile setting products. Bonsal American sells its branded products through a network of distributors and a direct sales force to professional builders, contractors, engineers, architects, municipalities and building materials retailers.

Headquartered in Charlotte, N.C., Bonsal American is a division of Oldcastle APG. The parent company, CRH International Group, is based in Ireland and has operations in 25 countries, with 66,500 employees at more than 2,600 locations worldwide.

CertainTeed Ceiling Facility Celebrates Three Years Accident-Free
CertainTeed is pleased to announce that the CertainTeed Ceilings manufacturing facility in Meridian, Miss., has reached the milestone of working three years without a lost-time accident. A lost-time accident is defined as one that prevents an employee from returning to work for his/her next scheduled shift.

The Meridian facility is one of the biggest plants in Eastern Mississippi and employs 140 employees who manufacture mineral ceiling systems. In total, the plant’s employees have worked 500,000 hours to achieve 1,095 days of no lost-time accidents in the workplace.

Kyle Watts, Meridian plant manager, attributes this milestone achievement to the efforts of Roger Williams, safety facilitator and shipping supervisor, who is the lead instructor of the plant’s safety training.

The plant has worked with local officials, such as the fire department, ambulance team, Homeland Security and 911 service providers to guarantee that safety procedures are followed and understood correctly.

Other ways the plant employees have taken safety measures include significant emphasis on training and awareness, weekly group briefings on the floor by production staff, safety management audit team audits by all employees, and high visibility clothing and personal protective equipment, such as earplugs, safety glasses and steel toe shoes, are worn. Safety-related work orders are also completed with training facilitators on safety teams.

In addition, the plant has painted pedestrian walkways through the facility, provided awareness training for new hires and temporary employees, kept maintenance employees in pairs in isolated locations, offered first responder training, and improved communications with local emergency responders. The plant also added mechanical guarding and barriers.

People & Companies In the News
Tridon Industries has hired Dale Hackett as an inside sales representative at the company’s Pottstown, Pa., headquarters. In his new position he will be responsible for implementing sales strategies as well establishing and maintaining customer relations.

Hackett has more than 20 years of sales and management experience, having been responsible for overseeing several insulation companies, as well as owning and operating his own insulation business.

Tools for Trades has completed its new corporate offices and distribution center in Ball Ground, Ga. After 21 years of growth in their original home, the new facility was specifically designed to meet current needs, as well as accommodate future expansion.

Sto Corp., Atlanta, has completed a year-and-a-half–long project to upgrade and automate its Dry Production Process at its Atlanta plant location.

"The investment targeted improving employee safety and their work environment, increasing daily production output and eliminating manual tasks,” said David Boivin, Sto Corp.’s CEO. Sto Corp. also operates manufacturing facilities in Glendale (Phoenix), Ariz. and Rutland, Vt.

Project Manager Kirk LaDuke developed the process concepts, implemented and managed the entire project. The new systems features state-of-the-art material preparation and transporting, PLC controlled precision material weighing technology and state-of-the-art material high-speed packaging including UltraSonic Bag sealing.

Plant Manger Jerry Haller and his team successfully commissioned the system and the process has been producing record levels of finished product since start up. Negwer Materials Inc., St. Louis, Mo., has added Charles Richey as an outside sales representative in its southeast Missouri office.

Richey has more than 11 years of experience as a sales manager for Heartland Distributing and Alpha Premiere Industries in southeast Missouri.

Well seeded throughout most of Europe, Multiquip is now growing in another fertile construction hot spot—Italy. The Carson, Calif.–based light- and medium-size construction equipment manufacturer named Beton Tool Company, in Vicenza, Italy, its newest concrete product dealer and first in that nation.

BTC is an equipment supplier specializing in concrete placing and finishing products. The company caters, via established concrete equipment sub dealers, to concrete and general contractors engaged in a variety of commercial, industrial and residential projects throughout Italy.

Dryvit Systems, Inc., West Warwick, R.I., has named John Ratter as regional sales manager for the Great Lakes Region, and the company has appointed Hunter Swearingen to district manager in California and Rob Landry to sales account manager in southeastern Louisiana, building upon the company’s recent growth in these markets.

In his new post, Ratter is responsible for managing Dryvit’s daily sales activities for Michigan, Indiana, Ohio, West Virginia, Western Pennsylvania and upstate New York.

Ratter previously sold Dryvit products for two distributors in Western Michigan (C.A.S.H. and Specialty Distributors Inc.) and was most recently an outside sales representative for Home Acres Building Supply Company (Muskegon, Mich.), working with commercial and residential contractors.

Swearingen brings more than 13 years of sales experience within the construction industry to his new post at Dryvit, where he manages all daily sales activities for California.

Landry has 12 years of experience as an applicator and is responsible for the day-to-day management of sales and service operations in the southeastern Louisiana territory, including Baton Rouge, New Orleans and the North Shore.