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Housing Recovery Continues but Headwinds Remain

Buoyed by rising home prices throughout much of the nation, both single-family and multifamily housing starts are expected to post double-digit gains over last year in 2013. However, headwinds continue to hold back even stronger growth as the housing recovery evolves, according to economists at NAHB’s Spring 2013 Construction Forecast Conference Webinar.





“The broadening housing expansion is evidenced by the NAHB/First American Improving Markets Index, which now lists 273 metros areas out of a universe of 361, or three-quarters of the metropolitan areas in the United States,” said NAHB Chief Economist David Crowe.




The recent surge is almost all due to improvements in house prices across a broader number of markets, he added. Home price increases became more solid and consistent in 2012, and the latest data show a nearly 6 percent annual rate of home price appreciation on a national basis.




Growth in the housing sector is rising at a much faster pace than the overall economy during this phase of the recovery, Crowe added. The residential fixed investment component of GDP was up 17.5 percent in the fourth quarter of 2012 whereas total economic output registered only a 0.4 percent gain.




As demand for housing gradually picks up steam, supply chains for building materials, developed lots and skilled workers will take some time to re-establish themselves in the aftermath of the Great Recession.




Meanwhile, builders are feeling pinched by rising costs of key building components (prices of gypsum, softwood lumber and concrete are all above 90 percent of their housing boom peak), which is causing home construction costs to rise at a faster pace than appraised values, Crowe said.




Moreover, ongoing difficulties in obtaining construction credit, overly restrictive mortgage lending rules and uncertainty in Washington regarding the future of housing financial regulations and housing tax incentives, including the mortgage interest deduction and Low Income Housing Tax Credit, threaten to dampen consumer confidence and future housing demand.




Setting the 2000 to 2003 period before the housing boom as a time of normal residential building production, Crowe said that residential remodeling has returned to previously normal levels of the early 2000s and that remodeling activity is expected to register a 2.2 percent gain this year over 2012.




Meanwhile, NAHB’s Multifamily Production Index, a leading indicator for the multifamily market, has jumped 38 points in the past four years and now stands at 54. For the past three quarters, the index has been above the critical tipping point of 50, where a reading of 50 means that an equal number of builders view conditions in the multifamily market as good and bad.




Multifamily starts are expected to rise to 334,000 units in 2013, up 35 percent from last year’s 247,000 level, bringing production back to the baseline level that is needed to keep the supply in balance with demand. Multifamily starts are anticipated to rise an additional 5 percent next year to 349,000 units.




The single-family market, which must make up the most ground to return to its 2000–2003 level of normal production (1.3 million units), continues to make steady gains. NAHB is forecasting 672,000 single-family housing starts in 2013, up 23 percent from the 534,000 units recorded last year. Single-family production is expected to rise an additional 28 percent in 2014, to 858,000 units.




Fed to the Rescue


Taking a more bullish approach to the housing and economic recovery, Maury Harris, managing director and chief economist for the Americas for UBS, expects housing starts to total 1.1 million units this year (700,000 single-family and 400,000 multifamily) and 1.35 million units (900,000 single-family and 450,000 multifamily) in 2014.




“My view is that monetary policy is more important than fiscal policy,” Harris said, noting that the sequester will cut about $85 billion in spending out of the economy this year while the Federal Reserve’s monetary expansion policy is pumping $85 billion into the economy every month.




“As the Fed buys securities and pumps reserves into the banking system, this is easing lending standards and that will help job growth,” he added.




Harris expects unemployment to fall to 7.5 percent at the end of this year and 6.7 percent at the end of 2014.




With job formation a critical variable affecting household formation, Harris expects 1.1 million new households to form this year and an average of 1.3 million new household formations annually over the next three years.




During the housing downturn, new household formations plummeted to 500,000 annually. As housing and the economy recover, there is a large pent-up demand for housing. Harris said that the household gap, which is the difference between potential and actual household formation, is about 2 percent of potential households or about 2 million.




“The bottom line: We’re reasonably optimistic about the economy,” Harris said. “The public doesn’t sufficiently appreciate all the good that the Fed is doing.”




Conditions Vary by State


Now that the boom and bust carnage is over, a major development on the housing front is that housing markets are reconnecting to their underlying economies, according to Robert Denk, NAHB’s assistant vice president for forecasting and analysis.




“The housing market is now being driven by local economic fundamentals,” said Denk. “Energy states and those driven by agricultural commodities are seeing their housing markets turn around the fastest.”




California, Florida, Nevada and Arizona, which fell the farthest during the housing downturn, bottoming out at 10 to 20 percent of normal production, are showing progress in making a comeback. Home prices in many of these markets are returning to normal and near-normal levels, thanks in part to foreclosure rates that have eased significantly since hitting their peak in 2009.




“While these former bubble states still have a long way to go to get back to normal, they have been replaced by the industrial Midwest, which is facing weakness in manufacturing, as the laggard in the recovery,” Denk said.




Led by North Dakota, Texas, Oklahoma, Wyoming, Montana and Louisiana, the energy producing states are the first states projected to return to normal production levels by the end of next year, Denk said. Iowa, a farm belt state supported by agricultural commodities, is also approaching a faster return to normal conditions.




In another way of looking at the long road back to normal, by the end of 2014, the top 20 percent of states will be at or above 87 percent of normal production, compared to the bottom 20 percent, which will still be below 60 percent.




Builder Confidence Improves in May


Builder confidence in the market for newly built, single-family homes improved three points to a 44 reading on the National Association of Home Builders/Wells Fargo Housing Market Index for May, released May 15. This gain, from a downwardly revised 41 in April, reflected improvement in all three index components—current sales conditions, sales expectations and traffic of prospective buyers.




“Builders are noting an increased sense of urgency among potential buyers as a result of thinning inventories of homes for sale, continuing affordable mortgage rates and strengthening local economies,” noted National Association of Home Builders Chairman Rick Judson, a home builder from Charlotte, N.C. “This is definitely an encouraging sign even amidst rising challenges with regard to the cost and availability of building materials, lots and labor.”




“While industry supply chains will take time to re-establish themselves following recession-related cutbacks, builders’ views of current sales conditions have improved and expectations for the future remain quite strong as consumers head back to the market in force,” said NAHB Chief Economist David Crowe.




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 for 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 May. The index gauging current sales conditions increased four points to 48, while the index gauging expectations for future sales edged up a single point to 53 – its highest level since February of 2007. The index gauging traffic of prospective buyers gained three points to 33.




Looking at the three-month moving averages for regional HMI scores, no movement was recorded in the Northeast, Midwest or South, which held unchanged at 37, 45 and 42, respectively. Only the West recorded a decline, of six points to 49 in May.
Improving Markets List Includes 258 Metro Areas in May
The number of U.S. housing markets showing sustained improvement in three key measures fell slightly to 258 in May from 273 in April, according to the NAHB/First American Improving Markets Index, released May 6. This total includes entrants from all 50 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. Four new markets were added to the list and 19 were dropped from it this month. Newcomers included the geographically diverse metros of Dothan, Ala.; Elizabethtown, Ky.; Salisbury, Md.; and Salem, Ore.




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 258 metropolitan areas currently on the IMI, and separate breakouts of metros newly added to or dropped from the list in May, is available at www.nahb.org/imi.




Dodge Momentum Index Shows Further Growth in April


The Dodge Momentum Index rose 5.2 percent in April from the previous month, 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. After hesitating last fall, the Momentum Index is strengthening once again, as the uncertainty that restrained plans for new construction now appears to be easing. Gains have been reported for the Momentum Index in each of this year’s first four months, and since December 2012 the Momentum Index is up by 23 percent. The April increase brings the Momentum Index to 114.4, the highest level since mid-2009.




The April advance for the Momentum Index was largely the result of a strong upturn by its commercial segment (see table below). New plans for commercial buildings rose 8.5 percent in April, buttressed by several retail projects. Among the larger retail developments to enter planning in April were a new $71 million outlet center in Niagara Falls, N.Y., and a $60 million shopping center in San Francisco. New plans for a 347-room luxury hotel planned for the Mall of America in Bloomington, Minn., gave the pipeline for commercial development a further boost.




Meanwhile, the institutional segment in April showed only slight 1.2 percent gain, as a decline in plans for new healthcare buildings offset a gain for education-related development, including a new $120 million veterinary building and lab at Texas A&M University.
More Positive Momentum for Architecture Billings
The Architecture Billings Index is reflecting a steady upturn in design activity. 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 April 24 that the March ABI score was 51.9, down from a mark of 54.9 in February. This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 60.1, down from the reading of 64.8 the previous month.




“Business conditions in the construction industry have generally been improving over the last several months,” said AIA Chief Economist Kermit Baker, Ph.D., Hon. AIA. “But as we have continued to report, the recovery has been uneven across the major construction sectors so it’s not a big surprise that there was some easing in the pace of growth in March compared to previous months.”




Key March ABI highlights include the following:




• Regional averages: Northeast (54.6), Midwest (53.9), South (53.6), West (51.9).




• Sector index breakdown: multifamily residential (56.9), commercial/industrial (53.5), mixed practice (53.3), institutional (50.6).




• Project inquiries index: 60.1.




The regional and sector categories are calculated as a three-month moving average, whereas the index and inquiries are monthly numbers.




ASA Revises Subcontractor Bid Proposal to Deter Bid Shopping


The American Subcontractors Association’s newly revised Subcontractor Bid Proposal now contains a provision designed to deter “bid shopping.”




The new provision states: “Subcontractor has devoted time, money and resources toward preparing this bid in exchange for Customer’s express agreement that the parties shall have a binding contract consistent with the terms of this bid proposal and Customer unconditionally and irrevocably accepts this bid proposal if it (A) in any way uses or relies on the bid proposal or information therein to prepare ‘Customer’s bid’ for the project at issue and Customer is awarded a contract for the work; or (B) divulges the bid or any information therein to others competing with Subcontractor for the work.”




Released May 2, the updated ASA Subcontractor Bid Proposal (2013) allows subcontractors and their clients to establish terms of the ASA-endorsed ConsensusDocs 750 Standard Form of Agreement Between Constructor and Subcontractor (2012). If a client accepts the subcontractor’s bid that has been properly conditioned with this form, a binding contract exists based on the terms of the ConsensusDocs 750 (2012). Instructions are included with the ASA bid proposal form.




Members of the ASA can access the document in the member resources section of the ASA website, www.asaonline.com, while nonmembers can download it at no cost by selecting “Sample ASA Document.”




ICC-ES Has Updated Its Acceptance Criteria


The ICC Evaluation Service has updated its acceptance criteria to reflect revisions to the 2012 International Building Code® and 2012 International Residential Code®. Many manufacturers have updated, or are in the process of updating, their ICC-ES evaluation reports with the most current technical data, showing compliance with the 2012 I-Codes. ESRs updated to the most current codes demonstrate to code officials, designers, architects, engineers and others in the construction industry that they can confidently approve or specify products based on the most current information.




For more information visit www.icc-es.org.




Springtime Is Greener as Remodeling Gains Speed


The National Association of the Remodeling Industry’s first-quarter Remodeling Business Pulse data of current and future remodeling business conditions is reaching new heights, as quarter-over-quarter increases are seen across all subcomponents measuring remodeling activity.




Overall current business conditions have seen steady increases since March 2012, and at the end of April 2013 it was at a statistically significant 5.97 rating compared with the 5.59 rating from one year before.




Growth indicators in the first quarter of 2013 are as follows:




• Current business conditions up 1.0 percent since last quarter.




• Number of inquiries up 4.9 percent since last quarter.




• Requests for bids up 5.2 percent since last quarter.




• Conversion of bids to jobs up 1.1 percent since last quarter.




• Value of jobs sold is up 0.2 percent since last quarter.
Sharp increases in the number of inquiries and requests for bids point speak directly to an increase in consumer confidence, especially in housing.




More specifically, drivers of remodeling activity include needing improvements due to postponement of projects (83 percent reported this as a driver) and improving home prices with 59 percent reporting (an 8 percent jump from fourth quarter data).




Other significant contributors to overall activity:




• Certainty about the future was reported by 44 percent of respondents.




• Economic growth was reported by 43 percent of respondents.




• Low interest rates was reported by 42 percent of respondents.




• Growth in stock market was reported by 39 percent of respondents.




Whereas two-thirds of remodelers forecasted the next three months positively in December 2012, now 76 percent of remodelers believe there will be growth in the next three months. Only 7 percent of respondents reported declines in the near future.




To review the research in its entirety, please send your request to marketing@nari.org.




Award Winners


Three members of the Association of the Wall and Ceiling Industry have received national recognition from the American Subcontractors Association for their excellent ethics: M.L. Jones Acoustics, Tulsa, Okla.; Marek Brothers Systems, Inc., Houston, Texas; and South Valley Drywall, Littleton, Colo. The ASA presented its 2012 Excellence in Ethics Award in March to companies that achieved the highest standard of internal and external integrity for a subcontracting firm.




ASA established the ethics awards program in 2008. Each applicant is required to respond to questions concerning the firm’s corporate ethics policies and procedures, its construction practices, and its general business practices. Each applicant also is required to submit detailed documentation, including sealed letters of recommendation from a customer, a competitor and a supplier.




ASA recognized six other subcontractors for excellence in ethics as well:




•Air Masters Corporation, Fenton, Mo.




•Bazan Painting Company, St. Louis, Mo.




•F.A. Rohrbach, Allentown, Pa.




•Holes Incorporated, Houston, Texas




•Markham Contracting Company, Inc., Phoenix, Ariz.




•Western Engineering Contractors, Inc., Loomis, Calif.




As one of the leading subcontractors for drywall, masonry, acoustical ceilings and concrete and masonry restoration in the mid-Atlantic region, Manganaro Midatlantic, Beltsville, Md., was honored by the Baltimore-Metro chapter of Associated Builders and Contractors with Excellence Awards in two different categories at the ABC chapter’s annual Awards of Excellence Ceremony held in Baltimore in April. Manganaro was recognized in the Interior Finishes category and the Historical Restoration category.




Manganaro Midatlantic received the Excellence Award for the interior work on the University of Maryland Baltimore County Performing Arts and Humanities Center. Manganaro completed a scope that included complete drywall and acoustical ceilings inside the new facility and was responsible for installing structural studs, sheathing, and air/vapor barriers at the exterior walls.




In the category of Historical Restoration, Manganaro was given the award for their work on the Camden Yards Warehouse and Camden Station Museum project. This historical business park located next to the Baltimore Orioles Stadium is a symbol of the golden age of the Industrial Revolution for the city of Baltimore, and the buildings that Manganaro restored helped fuel this era. The Camden Yards Warehouse that was originally used to store railroad box cars had been converted some 20 years ago into functioning office spaces that now hold law firms, retail businesses and The Maryland Stadium Authority.





Golterman & Sabo, St. Louis, has received two awards from the American Subcontractors Association Midwest Council at the 20th Anniversary Platinum Awards Gala, the Outstanding Specialty Subcontractor Award as well as a Safety Award.




This is the third year for Golterman & Sabo to receive the ASA Outstanding Specialty Subcontractor Award. As voted by a panel of general contractors, the award is based on the following criteria: bid ethics practice, safety policy and practices, jobsite supervision, scheduling coordination and project relations.




Golterman & Sabo received the ASA Midwest Council Safety Award for its distinguished commitment to the overall workplace safety and health environment for their employees. The jury recognized Golterman & Sabo’s outstanding numbers for recordable injuries, lost time incident rates, ongoing safety training, a clear management commitment for safety, and employee participation in the safety process.




ClarkDietrich Building Systems, West Chester, Ohio, was recognized with the Design Excellence and Construction Innovation Award from the Cold-Formed Steel Engineers Institute. Awarded annually, the CFSEI awards acknowledge outstanding achievement in creative design, technical innovation and best practices in the use of cold-formed steel.




ClarkDietrich received the Design Excellence Award for its role in the construction of the Western Connecticut State University Visual and Performing Arts Center. The 137,000 square-foot project presented several unique design challenges for the use of cold-formed steel including a 96-foot soaring wall, an interior 40-foot plenum, as well as trapezoidal and triangular windows.




ClarkDietrich was also the recipient of the prestigious Construction Innovation Award for the use of the company’s BlazeFrame™ fire-stopping system in the recent construction of a University of Massachusetts Lowell student housing project.





CertainTeed Ceilings, Valley Forge, Pa., was honored at the 2013 Ceilings & Interior Systems Construction Association Convention, receiving three Construction Excellence Awards for projects utilizing the company’s Decoustics custom acoustic solutions.




Decoustics custom ceilings received a Gold award in the Acoustical Solutions category for the new Benjamin Russell Hospital for Children in Birmingham, Ala., and a Bronze award in the Ceilings category for the remodel of Boston-based growth equity firm Summit Partners’ office space. In the Boutique category, which recognizes unique interior projects smaller than 10,000 square feet, Decoustics earned Bronze honors for the new visitor center at the Brooklyn Botanical Garden in Brooklyn, N.Y.




People in the News


Megan Nichols has been promoted to director of marketing and service serving Chicago Metallic® Corporation North America. Working closely with Jim Moynihan, vice president and general manager, she oversees the company’s product managers, customer service manager and senior distribution manager.




Chicago Metallic’s product managers now include Mark Kemerling for panel products, Tracy Muller for specialty ceilings and Mark Taylor for suspension systems. Karen Miller has increased responsibilities as customer service manager. George Dempsey has been promoted to senior distribution manager responsible for shipping departments in Baltimore, Chicago and California.




Companies in the News


Parex USA, Inc., the parent company of the Parex, Teifs, LaHabra, El Rey, Merkrete and Variance brands, has announced its Qualified Vendor relationship with Choice Hotels International, one of the world’s largest hotel companies.





Choice Hotels International, Inc. franchises more than 6,200 hotels representing more than 499,000 rooms, in the United States and more than 30 other countries and territories. With more than 350 locations in development, conversion or under construction in the United States and 88 additional hotels under construction, conversion or approved for development in more than 20 other countries and territories around the world, Choice Hotels continues their strong growth performance.




As a Choice Hotels Qualified Vendor, Parex USA will work with CHI’s architectural and design teams to be included in brand standards, listed in CHI’s biannual published Qualified Vendor Directory and the Online Vendor Directory. Parex USA will have numerous other opportunities to participate in Choice Hotels venues developing relationships within their design and build teams and with franchisees throughout the year.




Products in the News


Sto Corp., Atlanta, announced that Sto VaporSeal has completed the ABAA (Air Barrier Association of America) Material Evaluation process and has been deemed an “ABAA Evaluated Material” and part of an “ABAA Evaluated Assembly.”





The listing for Sto VaporSeal can be found on the ABAA website under the Air Barrier Materials section at www.airbarrier.org/materials/index_e.php, Air Barrier Assemblies at www.airbarrier.org/materials/assemblies_e.php and in the appropriate fluid-applied ABAA air barrier master specification.




The Committee on Standards of ASTM International has approved the use of Plastic Components’ Ultra-Lath Plastic Lath with portland cement-based plaster in vertical wall applications. Ultra-Lath now carries ASTM approval C1764-12.




The International Code Council Evaluation Service has granted the Certified Steel Stud Association approval for compliance with the 2009 and 2012 International Building Codes and International Residential Codes for its structural load-bearing steel framing products as indicated in its evaluation report number ESR-3016.




New on the ’net


Sto Corp, Atlanta, has launched its first mobile app for iPhone and iPad. The Sto App, which is accessible free from iTunes, includes information and documentation for Sto systems and products, as well as a distributor locator function.

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