Builder confidence in the market for newly-built single-family homes hit a significant milestone in June, surging eight points to a reading of 52 on the National Association of Home Builders/Wells Fargo Housing Market Index released June 17. Any reading over 50 indicates that more builders view sales conditions as good than poor.
“This is the first time the HMI has been above 50 since April 2006, and surpassing this important benchmark reflects the fact that builders are seeing better market conditions as demand for new homes increases,” said NAHB Chairman Rick Judson, a home builder and developer from Charlotte, N.C. “With the low inventory of existing homes, an increasing number of buyers are gravitating toward new homes.”
The eight-point jump in the index was the biggest one-month gain since August and September of 2002, when the HMI recorded a similar increase of eight points.
“Builders are experiencing some relief in the headwinds that are holding back a more robust recovery,” said NAHB Chief Economist David Crowe. “Today’s report is consistent with our forecast for a 29 percent increase in total housing starts this year, which would mark the first time since 2007 that starts have topped the 1 million mark.”
Derived from a monthly survey that NAHB has been conducting for 25 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 “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
All three HMI components posted gains in June. The index gauging current sales conditions increased eight points to 56, while the index measuring expectations for future sales rose nine points to 61—its highest level since March 2006. The index gauging traffic of prospective buyers rose seven points to 40.
The HMI three-month moving average was up in three of the four regions, with the Northeast and Midwest posting a one-point and three-point gain to 37 and 47, respectively. The South registered a four point gain to 46 while the West fell one point to 48.
List of Improving Housing Markets Rises to 263 Metros in June
The number of U.S. housing markets on the mend rose by five to a total of 263 in June, according to the National Association of Home Builders/First American Improving Markets Index, released June 6, 2013. The list includes entrants from 49 states and the District of Columbia.
The IMI identifies metropolitan areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months. Twenty-nine new markets were added to the list while 24 others were dropped from it in June. New entrants included such geographically diverse metros as Salinas, Calif.; Sioux City, Iowa; Chicago, Ill.; Topeka, Kan.; Baton Rouge, La.; Laredo, Texas; and Philadelphia.
“This is the fifth consecutive month in which the IMI has designated more than 70 percent of U.S. metros as improving,” observed NAHB Chairman Rick Judson, a home builder from Charlotte, N.C. “While that’s a good sign that the housing recovery is on solid footing, we know that various challenges are slowing its progress—including continuing issues with credit availability for builders and buyers, as well as appraisals that aren’t keeping up with the rising cost of construction.”
“As market conditions improve across most of the country, some metros have moved onto the IMI list while marginal seasonal fluctuations have nudged others off of it,” noted NAHB Chief Economist David Crowe. “This is to be expected as the recovery expands. Meanwhile, it’s worth noting that the number of improving markets is now more than three times what it was in June 2012.”
“The continued strength of the IMI is an indicator of the ongoing, positive momentum in housing markets nationwide as consumers move to take advantage of historically favorable interest rates and affordable home prices,” added Kurt Pfotenhauer, vice chairman of First American Title Insurance Company.
The IMI is designed to track housing markets throughout the country that are showing signs of improving economic health. The index measures three sets of independent monthly data to get a mark on the top Metropolitan Statistical Areas. The three indicators that are analyzed are employment growth from the Bureau of Labor Statistics, house price appreciation from Freddie Mac and single-family housing permit growth from the U.S. Census Bureau. NAHB uses the latest available data from these sources to generate a list of improving markets. A metro area must see improvement in all three measures for at least six consecutive months following those measures’ respective troughs before being included on the improving markets list.
A complete list of all 263 metros currently on the IMI, and separate breakouts of metros newly added to or dropped from the list in June, is available at www.nahb.org/imi.
Turner’s Building Cost Index Increase Driven by Growth in Larger, Urban Markets
Turner Construction Company announced that the Second Quarter 2013 Turner Building Cost Index, which measures costs in the non-residential building construction market in the United States, has increased to a value of 859. This reflects a 1.18 percent increase from the First Quarter 2013 and 4.00 percent yearly increase from the Second Quarter 2012.
“Larger urban markets appear to be expanding more rapidly than other regions. Contributing to the increase in construction costs is the limited capacity among those trade contractors with the available resources to manage and work on large, complex projects,” said Karl F. Almstead, the Turner vice president in charge of the Cost Index. He continued, “While lower global demand is maintaining downward pressure on material and equipment costs, there is upward pressure on specialty equipment and material costs in growing building types such as data centers.”
Approximately 90 of Turner’s business is performed under contract arrangements where Turner provides extensive preconstruction planning services before the contract price is fixed and before construction starts. By providing preconstruction services and utilizing enhanced procurement strategies, Turner effectively manages the market risks associated with cost-related issues.
Turner has prepared the construction cost forecast for more than 80 years. The Cost Index is determined by several factors considered on a nationwide basis, including labor rates and productivity, material prices and the competitive condition of the marketplace. This index does not necessarily conform to other published indices because others do not generally take all of these factors into account.
Nonresidential Construction Index Hits Record High
The 2013 Second Quarter Nonresidential Construction Index report released May 24 by FMI shows the Nonresidential Construction Index with a score of 60.1. This is a two-point improvement over Q1 and the highest score for the NRCI index since its inception in the first quarter of 2009.
This isn’t a bullish trend yet, but it demonstrates that the nonresidential construction market continues to push upward. However, the index for the overall economy rose 7.9 points and the combined index sentiment for economies where panelists are doing business rose 5.8 points. Current issues for the Q2 NRCI include the effects of sequestration on public and private construction. The majority of the respondents expect only a 0 to 4 percent reduction in their public works projects due to sequestration.
Panelists for this quarter’s NRCI also responded to questions about potential labor shortages after losing more than 30 percent of the construction labor force during the recession. The majority of panelists reported few labor shortages at this time. Looking at a year from now, 22 percent of panelists expect severe shortages for construction laborers, as well as shortages for select tradespeople.
ABI in Negative Territory for First Time in Nine Months
After indicating increasing demand for design services for the better part of a year, the Architecture Billings Index reversed course in April.
As a leading economic indicator of construction activity, the ABI reflects the approximate nine to 12 month lag time between architecture billings and construction spending. The American Institute of Architects reported the April ABI score was 48.6, down from a mark of 51.9 in March. This score reflects a decrease in demand for design services (any score above 50 indicates an increase in billings) and is the lowest mark since July 2012. The new projects inquiry index was 58.5, down from the reading of 60.1 the previous month.
“Project approval delays are having an adverse effect on the design and construction industry, but again and again we are hearing that it is extremely difficult to obtain financing to move forward on real estate projects,” said AIA Chief Economist Kermit Baker, Ph.D., Hon. AIA. “There are other challenges that have prevented a broader recovery that we will examine in the coming months if this negative trajectory continues. However, given that inquiries for new projects continue to be strong, we’re hopeful that this is just a short-term dip.”
Key April ABI highlights are these:
• Regional averages: South (52.6), West (50.7), Midwest (49.4), Northeast (48.2).
• Sector index breakdown: multifamily residential (52.0), institutional (50.1), commercial/industrial (49.2), mixed practice (48.6).
• Project inquiries index: 58.5.
Note: The regional and sector categories are calculated as a three-month moving average, whereas the index and inquiries are monthly numbers.
Good News: May KBI Is Unchanged
WOLF, the largest supplier of kitchen cabinets in the United States and a provider of building products in 28 states along the East Coast, reported on May 16 the findings of the WOLF Key Buyer Index for May.
The May KBI score of 72.67 reflects virtually no change from the April KBI of 73.67. The fact that the score remains at this level suggests that building materials buyers at selected independent LBM dealers in the eastern United States are holding fast to their optimism about the residential construction industry in that region.
WOLF developed KBI, a proprietary metric that offers a monthly snapshot of independent dealers’ sentiments, to provide a concrete measure of how building materials buyers see the near-term future of their industry. WOLF gathers data for the KBI from a monthly survey of key buyers at independent building materials dealers across 21 states. A WOLF KBI score of 50 reflects a neutral outlook; a score above 50 reflects a positive outlook; and a score below 50 reflects a negative outlook.
Buyer sentiment is equally bullish in both of WOLF’s traditional markets (the Northeast and Middle Atlantic States). On the building product side, Northeastern buyers returned a KBI score of 78.57 while their Middle Atlantic counterparts returned an even more optimistic score of 80.00. On the kitchen and bath side, meanwhile, Northeastern buyers returned a KBI score of 83.33 while kitchen and bath buyers in the Middle Atlantic region returned a score of 72.73.
On the whole, the KBI indicates a continued bullishness on the part of residential construction material buyers as to the state of the residential construction activity in the markets they serve. The high KBI scores show that key buyers expect this industry to remain strong at least through the month of May in the Northeast and Middle Atlantic states.
See the latest KBI score at www.wolfleader.com.
Office Construction Leads April Building Construction Growth
New construction starts in April settled back 1 percent to a seasonally adjusted annual rate of $473.0 billion. McGraw Hill Construction, a division of McGraw Hill Financial, reported that nonresidential building in April showed some improvement after its lackluster performance during the previous two months. On an unadjusted basis, total construction starts in the January-April period of 2013 came in at $141.1 billion, down 5 percent from the same period a year ago. The 2013 year-to-date amount for total construction was pulled down by a sharply reduced volume of new electric utility starts. If electric utilities are excluded, total construction starts would be up 12 percent year-to-date, with most of the lift coming from this year’s stronger rate of homebuilding.
The April statistics produced a reading of 100 for the Dodge Index (2000=100), compared to the 101 that was reported for March. For all of 2012, the Dodge Index averaged 100. “Total construction starts during the early months of 2013 have been able to stay close to last year’s average pace, but the moderate upward trend that was present last year has yet to resume,” stated Robert A. Murray, vice president of economic affairs for McGraw Hill Construction. “The housing market for the most part has maintained its recent strength, even with a slight pause in April. The boost that had been expected to come in 2013 from nonresidential building is at best only beginning to take hold, as the pickup in April followed weak activity in February and March.
Residential building, at $198.0 billion (annual rate), eased back 1 percent in April. Single-family housing in April decreased 1 percent, and during the past two months it has basically leveled off following the steady increases shown over the past year, McGraw-Hill announced. The rate of activity for single-family housing was still elevated by recent standards—up 20 percent from its average monthly pace during 2012. By region, reduced activity was registered by the South Atlantic and the West, each down 5 percent, which slightly outweighed gains in the South Central, up 1 percent; the Midwest, up 4 percent; and the Northeast, up 6 percent. Multifamily housing slipped 2 percent from the previous month, although like single-family housing it was still elevated by recent standards—up 19 percent from its average monthly pace during 2012.
Nonresidential building in April grew 6 percent to $144.3 billion (annual rate), showing improvement after a weak March, although still 7 percent below its average monthly pace during 2012. The commercial segment in April was mixed by project type. Office construction climbed 58 percent and store construction increased 5 percent. On the negative side, warehouse construction fell 11 percent, and hotel construction dropped 9 percent. Manufacturing plant construction, which can be volatile on a month-to-month basis, decreased 49 percent.
The institutional segment of nonresidential building was also mixed by project type in April. Healthcare facilities strengthened after a weak March, rising 48 percent; amusement-related work advanced 6 percent; and educational facilities, the largest nonresidential building category, dropped 19 percent. Weaker activity was also reported in April for public buildings, down 17 percent, and churches, down 27 percent.
New-Home Sales Rise 2.3 Percent in April
Sales of newly built, single-family homes rose 2.3 percent to a seasonally adjusted annual rate of 454,000 units in April, according to figures released May 23 from HUD and the U.S. Census Bureau. The gain builds on a strong upward revision to sales numbers reported for the previous month.
“Builders are reporting an active spring buying season as consumers become more confident about going forward with a new-home purchase along with steadily firming prices in local markets,” said Rick Judson, chairman of the National Association of Home Builders and a home builder from Charlotte, N.C. “While the cost of constructing homes is rising due to tightened supplies of materials, lots and labor, to some extent, this may be creating greater urgency among potential buyers.”
“This report is further evidence of the gradual, consistent improvement we have been seeing in housing market conditions over the past year,” noted NAHB Senior Economist Robert Denk. “We’re now about half-way back to what could be considered a full recovery, and we do expect to see continual, solid gains in both starts and sales of new homes going forward.”
Regionally, new-home sales rose 3.0 percent in the South and 10.8 percent in the West, but fell 4.8 percent in the Midwest and 16.7 percent in the Northeast in April. The inventory of new homes for sale edged up to a still-thin 156,000 units in April. This is a 4.1-month supply at the current sales pace.
New Course Offers Best Practices in Acoustical Ceiling Design for Classrooms
A new online training course on classroom acoustics now available from CertainTeed Ceilings provides architects and designers the latest science on the role of proper sound control in student learning.
Specifically, the free course, “Ceilings: Classroom Acoustics,” examines topics including noise sources in an educational environment, signal-to-noise ratio, speech intelligibility testing, relative decibel levels, academic studies on classroom acoustics, and classroom noise and sound absorption as they relate to LEED.
The program has been approved by the U.S. Green Building Council Leadership in Energy and Environmental Design (LEED®) professional credentialing program, and is also registered with the American Institute of Architects Continuing Education System. The course offers one credit hour toward professional education requirements and qualifies for Health, Safety and Welfare credit through AIA.
CertainTeed offers more than 35 free online courses for professionals that can be used to meet all standards of national and local continuing education learning units. For more information, visit www.certainteed.com/continuinged.
People in the News
David Hilbig has joined Topcon Positioning Systems, Livermore, Calif., as a regional sales manager for the Construction Business Unit. His territory will include California, Washington, Oregon, Arizona, Nevada, Utah, Idaho and New Mexico.
Companies in the News
Altus Capital Partners, Inc., a private equity investment firm focused on niche middle market manufacturing companies in the United States, announced June 3 the closing of the sale of Thermafiber, Inc., a producer of mineral wool insulation products for commercial, industrial and horticultural applications, to Owens Corning, a global producer of residential and commercial building materials, glass-fiber reinforcements and engineered materials for composite systems. Thermafiber’s products are used in a variety of applications requiring thermal, acoustic and fire safety attributes.
Thermafiber, based in Wabash, Ind., and founded in 1934, is part of Altus’ first fund, Altus Capital Partners, L.P., which launched in 2004. Details of the transaction were not disclosed.
Altus acquired Thermafiber in 2007, along with members of senior management and other investors.
Products in the News
ClarkDietrich™ Building Systems, West Chester, Ohio, has updated their code report for structural C-sections and tracks, ESR-1166P, to meet the IBC 2012 and IRC 2012 building codes. The report also contains supplements for the 2010 California Building Code and Florida Building Code.
New on the ’net
The Stucco Manufacturers Association has produced its first in a series of YouTube videos on crack reduction through the use of base-and-mesh systems. You can view this video by going to www.stuccomfgassoc.com and clicking on the YouTube video on the bottom right of the page. The video was written and filmed by Nick Brown of Merlex Stucco and Ted Jones, an outside consultant. It discusses common cracking issues with stucco and how these crack-reduction systems work to minimize cracking. Footage of application in the field and expert commentary on results with these systems are also in the video.
