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Construction Trends

Housing and the Economy to Continue on an Upward Path, Economists Say

A growing economy, pent-up demand, competitive mortgage rates and affordable home prices will keep housing on an upward trajectory through 2015. However, several obstacles including tight consumer credit, shortages of lots and labor and rising materials prices are hindering a more robust recovery, according to economists who participated in the April 24 National Association of Home Builders 2014 Spring Construction Forecast Webinar.

“Housing needs an improved economy,” said NAHB Chief Economist David Crowe, adding that the economy is expected to respond as payroll employment continues to grow and the unemployment rate slowly recedes from 6.7 percent in the first quarter of this year to 6.2 percent by the fourth quarter of 2015.

Consumer confidence is back to pre-recession levels, and purchases of motor vehicles and home furnishings are on the rise, indicating that consumers are increasingly willing to buy big ticket items such as houses.

Reflecting an increase in credit demand and economic growth, mortgage interest rates are projected to rise to 5 percent by the end of 2014 and 6 percent by the end of next year. Noting that these rates are still low by historical standards, Crowe said this would “not be a significant deterrent to expansion in the housing market.”

With new-home sales averaging just 8.8 percent of total home sales, barely half the historical average of 16.1 percent, Crowe observed that “this is another reason to believe that the new-home market will have to make up existing ground.”

However, he cautioned that builders continue to face a number of headwinds.

“Supply constraints related to lots and labor and rising lumber, gypsum and OSB (oriented strand board) prices are hurting the ability of builders to meet demand,” he said. “Moreover, creditworthy borrowers, particularly younger families and first-time home buyers, are having difficulties in getting home loans.”

Remodeling, Sales and Starts on the Rise. The NAHB Remodeling Index, which averages ratings of current remodeling activity with indicators of future activity, stands at 53 in the first quarter of 2014 and has been above 50 for six of the past seven quarters. A reading above 50 indicates that more remodelers report market activity is higher (compared to the prior quarter) than report it is lower.

NAHB is forecasting that residential remodeling will post a 3.8 percent increase in 2014 over last year and rise an additional 2.4 percent in 2015.

New-home sales are expected to climb 29 percent from 431,000 in 2013 to 557,000 this year.

Single-family housing production is projected to increase 22 percent from 621,000 last year to 760,000 in 2014 and surge an additional 55 percent to 1.18 million units in 2015.

On the multifamily side, production is expected to rise 8 percent from 308,000 in 2013 to 331,000 this year, reaching what is considered a normal level of production.

Banks Awash in Cash. Agreeing that the economy is on an upward trajectory, Maury Harris, managing director and chief U.S. economist at UBS, said that financial lending institutions are sitting on a mountain of cash.

“Banks have over $2 trillion of excess reserves. That’s with a ‘T,’” he said. “Banks would like to put that money to work and increase lending, which will help the economy.”

In the aftermath of the Great Recession, Harris said normal household formations have fallen short by about 2.5 million as graduating college students were forced to move back in with their parents and young adults were doubling up in apartments.

“As unemployment comes down and credit availability eases, Millennials (the 25-34 age group) will feel better about their economic circumstances,” said Harris. “I think we will see the shared household rate come down, less doubling up and a pickup in household formations.”

Harris is forecasting 1.15 million housing starts this year (700,000 single-family and 450,000 multifamily) and 1.35 million next year (900,000 single-family and 450,000 multifamily).

A Gradual Climb to Normal. Looking at the state statistics behind the national numbers, Robert Denk, NAHB’s assistant vice president for forecasting and analysis, cited a range of differences among the states in the amount of distress suffered during the recession and the progress that is being made in recovering.

Housing production nationwide bottomed out at an average of 27 percent in early 2009 and reached 45 percent in the first quarter of 2014.

In the worst hit states, housing fell to 10 to 15 percent of normal production while production only fell by half in other states with a better underlying economy.

“The hardest hit states were the bubble states—Arizona, Florida, California and Nevada—along with the industrial Midwest, which struggles with challenges in the auto industry and a declining manufacturing sector,” Denk said.

Where individual states stand now has a lot to do with how far they fell when the Great Recession hit, Denk added.

Fueled by a booming energy sector that is producing solid job and economic growth, Texas, Louisiana, Oklahoma, Wyoming, North Dakota and Montana are at the forefront of the housing recovery, with North Dakota now the first state to surpass its normal level of housing production.

On a national basis, single-family housing starts are projected to get back to 70 percent of normal production by the end of this year and 93 percent of normal by the end of 2015, Denk said.

In another way of looking at the long road back to normal, by the end of 2015 the top 40 percent of states will be back to normal production levels, compared to the bottom 20 percent, which will still be below 80 percent.

Healthy Housing Industry Spurs Job Growth

The health of housing is key for the overall state of the U.S. economy, and housing stands poised to serve as an engine of job growth with the right policies in place, the National Association of Home Builders told Congress May 7.

Testifying before the Senate Banking Committee’s Subcommittee on Economic Policy during a hearing examining the drivers of job creation, NAHB economist Robert Dietz said that home building and remodeling have generated 274,000 jobs over the past two and a half years.

“This expansion has direct economic benefits,” said Dietz. “Housing provides the momentum behind an economic recovery because home building and associated businesses employ such a wide range of workers.”

Employment from new home construction and remodeling has a wide ripple effect. About half the jobs created by building new homes are in construction. They include framers, electricians, plumbers and carpenters. Other jobs are spread over other sectors of the economy, including manufacturing, retail, wholesale and business services.

NAHB analysis of the broad impact of new construction shows that building 1,000 average single-family homes generates 2,970 full-time jobs, $162 million in wages, $118 million in business income and $111 million in taxes and revenue for state, local and federal governments

Similarly, construction of 1,000 rental apartments, including units developed under the Low Income Housing Tax Credit, generates 1,130 jobs while $100 million in remodeling expenditures creates 890 jobs.

Currently, housing comprises about 15.5 percent of GDP but Dietz said the industry still has room to grow.

“Typically, housing represents 17 to 18 percent of the GDP,” he said. “With a growing population and an aging housing stock, NAHB forecasts that single-family construction will increase 22 percent in 2014 to 760,000 units and multifamily production will rise 6 percent to 326,000 units.”

Noting that 2014 should be the first year since 2007 in which total housing starts exceed 1 million homes, Dietz said this expansion will produce jobs. “In April alone, home builders and remodelers added 13,100 jobs,” he said.

NAHB estimates that total housing construction over the next few years should return to just under 1.7 million combined single-family and multifamily starts on an annual basis.

Homeownership also represents the most important investment and source of savings for most middle class households.

The latest economic data show that the primary residence represents 62 percent of the median home owner’s total assets and 42 percent of their wealth. Moreover, almost two-thirds of all U.S. households own a home, while just 50 percent possess a retirement account and only 16 percent own stocks and bonds.

Though homeownership remains a cherished American ideal, access to safe and decent affordable rental housing is needed for those households for whom renting is the best choice. The Low Income Housing Tax Credit, the nation’s only affordable housing production program, serves a critical role in this regard. Since its inception, the tax credit has produced and financed more than 2 million affordable rental apartments.

While home construction is poised to continue to expand and add jobs, builders continue to face persistent headwinds. These include access to building lots, rising building material prices, access to builder loans and worker shortages in some markets.

Additional challenges are the lack of policy certainty in areas connected to housing. To help the industry play its traditional role as a job creator, Dietz called on Congress to ensure that undue regulatory burdens do not hinder economic and job growth.

“Regulations imposed by the government at all levels account for 25 percent of the final price of a new single-family home built for sale,” he said.

On the tax front, Dietz urged lawmakers to protect the mortgage interest deduction and Low Income Housing Tax Credit, which are critical to ensuring the growth of the middle class and access to affordable housing, and to enact a tax extenders bill that would retroactively extend expired tax rules such as the minimum 9 percent credit rate for the Low Income Housing Tax Credit and residential energy efficient tax credits for new construction and for retrofitting existing homes.

Passing comprehensive housing finance reform that includes a federal backstop to ensure the availability of the 30-year mortgage, increase private capital in the marketplace and protect the American taxpayer would be a net positive for job creation, he added.
Nonresidential Construction Index Continues to Grow

FMI announces the release of the 2014 Second Quarter Nonresidential

Construction Index report, which shows slight improvement of a 0.9 point increase from Q1 and a 5.7 point increase from Q2 2013.

Although growth continues, it is beginning to slow indicating that the economy still holds a lingering recession mentality. The largest repercussion of this mindset is that it keeps companies from investing, banks from lending and consumers from spending. Thus, the pressure to keep prices low continues along with the need for greater profitability, leading to two key challenges: How to improve productivity, and where to find qualified personnel.

A 1.7 point decline in the productivity component of the NRCI is indicative of these challenges. To answer these issues, deliberate time must be spent on new ideas, innovation and R&D. However, 47 percent of industry panelists indicate that their company does not have an ongoing research-and-development effort. This suggests an opportunity exists to improve market position for those companies that can be the most innovative.

When panelists were asked where the industry most needs to focus future innovation, one industry leader responded, “On anything that makes construction more productive. More productivity means less labor is needed on-site during a time of real labor shortages.”

Dodge Momentum Index Rebounds in April

The Dodge Momentum Index advanced 8.4 percent in April to 123.0 (2000=100), according to McGraw Hill Construction, a division of McGraw Hill Financial. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. The Momentum Index had retreated in February and March, following the steady gains that were reported during most of 2013. With the April increase, the Momentum Index resumed its upward track and is up 17.8 percent compared to the same month a year ago. A harsh winter helped slow overall economic growth in the first months of 2014, but prospects for commercial development are again showing improvement, as reflected by the growing volume of projects at the planning stage and strengthening market fundamentals such as occupancy rates and rents.

The April Momentum Index was bolstered by an upturn for both of its segments. Commercial was the stronger of the two components, climbing 12.1 percent from March. Among the larger commercial projects to enter planning in April were several office buildings and hotels—a $300 million headquarters for Toyota in Plano, Texas, a $260 million convention center hotel in Seattle and a $200 million Waldorf Astoria hotel in Los Angeles. The institutional segment of the Momentum Index, meanwhile, rose 3.9 percent in April, marking its first monthly increase since January. A small increase in plans for educational buildings moderated the overall increase for institutional buildings and offset a stronger gain for healthcare projects.

Employment in the Construction Industry Grew by 32,000 in April

Specialty trade contractors experienced growth with 10,200 added to payrolls in April, according to the Bureau of Labor Statistics. Residential specialty trade contractors outpaced nonresidential specialty trade contractors, with employment gains of 6,200 and 4,000 respectively.

In April, employment in construction grew by 32,000, with job growth in heavy and civil engineering construction (+11,000) and residential building (+7,000). Construction has added 189,000 jobs over the past year, with almost three-fourths of the gain occurring in the past six months.

Total payroll employment rose by 288,000, and the unemployment rate fell by 0.4 percentage point to 6.3 percent in April, BLS reported.

“The unemployment rate for workers actively looking for jobs and last employed in construction declined from 13.2 percent a year earlier to 9.4 percent last month,” AGC Chief Economist Ken Simonson said. He noted that the unemployment rate for construction workers had fallen by more than half since April 2010, when it reached 21.8 percent. During that time, the number of unemployed workers who last worked in construction declined by 1.1 million, but industry employment increased by less than 450,000.

“There is a limit to how much overtime workers can put in, and companies will be seeking to expand employment even faster if the volume of projects continues to grow,” Simonson added. “But the huge drop in the number of unemployed former construction workers may make it harder to keep adding employees.”

AGC officials said that a sharp drop in the number of secondary-level construction training programs over the past several years has contributed to a decline in new entrants to the industry to replace retiring workers. They urged federal, state and local officials to adopt measures to help schools, construction firms and local trade associations to start and expand training programs for future construction workers.

AISI and CFSEI Co-Sponsor 2014 International Student Competition on Cold-Formed Steel Design

The American Iron and Steel Institute and the Cold-Formed Steel Engineers Institute are joining the National Science Foundation and the University of North Texas as co-sponsors in the fourth International Student Competition on Cold-Formed Steel Design. The competition is open to all full-time students at either the undergraduate or graduate levels who are interested in cold-formed steel design, creative in problem solving, and eager to learn new technologies. The competition is under way and will conclude Sept. 30, 2014. This is the only student competition of its kind in the cold-formed steel industry.

The competition is unique in that step-by-step instructions and free software are provided so that any student, regardless of the major area of study, can complete and submit a cold-formed steel design. Cold-formed steel refers to products made by rolling or pressing thin gauges of sheet steel into products.

“Although steel has been used as a building material for many years, structures framed with cold-formed steel require knowledge about the latest innovations in manufacturing, Building Information Modeling and logistics technologies,” said Maribeth Rizzuto, LEED AP-BD&C, managing director of the Cold-Formed Steel Engineers Institute. “With this competition, students are challenged to reach beyond their traditional studies, learn about the design capabilities of cold-formed steel, and apply this information to a specific problem that they might encounter in the workplace. The design solutions that we’ve received during the past three competitions have been very creative, and we’re looking forward to seeing the 2014 competition submissions.”

The 2014 International Student Competition on Cold-Formed Steel Design is co-hosted by the Cold-Formed Steel Engineers Institute and the University of North Texas. Students are required to work on the problem individually, with no team solutions accepted. They can use an open-source software, CUFSM, to perform the elastic buckling analysis. (CUFSM is software that employs the finite strip method to provide solutions for the cross-section stability of thin-walled cold-formed steel members.) Participants can view the problem and contest rules at

Students will submit a completed information form, design essay and CUFSM result file by Sept. 30, 2014. A panel of judges will review all entries and announce the winners in December 2014, with awards mailed in January 2015. Members on the panel of judges are nationally recognized in the area of cold-formed steel.

Monetary awards will be provided to the top three winners, and each of the top 10 winners will receive a one-year student membership in the Cold-Formed Steel Engineers Institute. The winning designs will be recognized and exhibited at selected professional conferences. For more information on the competition, contact Maribeth Rizzuto, LEED AP-BD&C, at or (412) 921.1060 or Cheng Yu, Ph.D.,, (940) 565.2022.

ConsensusDocs Coalition Releases New Standard Agreement Between Constructor and Testing Laboratory

The ConsensusDocs Coalition has published a new standard contract for testing laboratory services. General contractors, contractually referred to as constructors, often contract with an independent testing lab. Since lab service contracts present unique issues, a new industry standard contract is needed.

The ConsensusDocs 748 helps protect constructors and the labs they retain to ensure that all parties know their respective roles and responsibilities. Like all ConsensusDocs form agreements, ConsensusDocs 748 is developed with the consensus of many different industry perspectives based on fair and balanced, best practice principles.

For more information and to order your subscription, visit

People in the News

Parex USA, Inc., Anaheim, Calif., has added two new employees: Eric Hindson, Asia Pacific export manager, and Jimmy Trotter, architectural sales & national accounts representative for the Northeast.

Hindson has been in the stucco industry for more than 15 years. During this time he has worked in domestic and international sales. He held several sales and management positions. He will be in charge of growing the Parex export business in the Asia Pacific markets.

Trotter brings with him a wealth of knowledge in the EIFS and stucco industry. He will be handling the Northeast Corridor of the United States and will develop Parex USA project opportunities with architects, spec writers and national accounts in the region. Since joining our company, he has already started developing strong relationships in the Northeast and has begun making a quick impact within the design community.

Companies in the News

Cemco’s Ft. Worth, Texas, manufacturing facility has completed the installation of a new state-of-the-art roll-forming line dedicated to manufacturing USG’s CH-Studs, E-Studs and J-Runners for the UASG shaftwall system. Production has already begun and the entire line of USG Shaft-Wall studs and track is now available to ship directly from Cemco’s Ft. Worth facility to customers in the South-Central and Gulf States markets.

The Drake Group LLC, a consortium of 68 leading specialty distributors, presented CertainTeed Insulation with a Vendor of the Year Award at the company’s winter meeting in Dallas. Presented on an annual basis, the awards are based on feedback from distributors at more than 280 locations in 43 states. The award was presented to Russ Karnis, director of distribution sales, and Rob Malandra, vice president of sales for CertainTeed Insulation.

Hilti Canada is again being recognized as one of this year’s Best Workplaces in Canada by the Great Place to Work® Institute. Ranking 16 on this year’s list of 50 Best Large and Multinational Workplaces in Canada, the prestigious ranking complements the recognition that has been granted to Hilti Canada for the last five years.

Hilti Canada was also recognized with the special Credibility Award, which is given to workplaces with a combined focus on building trust, culture and practices that make the day-to-day relationships with employees a great experience.

This year’s list received more than 300 nominations, and more than 60,000 employees participated in the 2014 “Best Workplaces in Canada” survey.

L&W Supply has opened a new branch in northeast Baltimore at 10521 Industrial Park Rd. in White Marsh, Md.

L&W Supply Branch Manager Mark Wieczynski said the new White Marsh location has a larger showroom and warehouse, and expanded tool line inventory, to better serve its customers in the Baltimore area.

Metl-Span, the NCI Building Systems division devoted to insulated metal panels, celebrated the grand opening of its newest manufacturing facility May 6 in Colonial Heights, Va. The plant—the company’s seventh—answers a growing demand for insulated metal building envelopes on more high-profile applications in new and retrofit construction, including entertainment venues, hospitality and retail.

The 109,000 square-foot plant will initially employ more than 30 personnel, and there are near-term plans to launch a second shift at the facility within two to three years, which will bring the total number of employees closer to 60.

Products in the News

ClarkDietrich™ Building Systems, West Chester, Ohio, has received a Code Compliance Research Report from Architectural Testing, Inc. for its ProSTUD® Drywall Framing System (ProSTUD and ProTRAK®). The report, CCRR-0207, confirms the system’s compliance with the 2012 International Building Code®, 2012 International Residential Code® and the 2013 California and 2010 Florida Building Codes.

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