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New Index Shows Housing Markets Back to Normal in 52 Metros

Housing markets in 52 out of the approximately 350 metro areas nationwide have now returned to or exceeded their pre-recessionary levels of activity, according to the Oct. 7 National Association of Home Builders/First American Leading Markets Index. The index’s nationwide score of .85 indicates that, based on current permits, prices and employment data, the nationwide housing market is running at 85 percent of normal activity.




Baton Rouge, La., tops the list of major metros on the LMI, with a score of 1.41, or 41 percent better than its last normal market level. Other major metros at the top of the list include Honolulu, Oklahoma City, Austin and Houston, Texas, as well as Harrisburg, Pa.—all of whose LMI scores indicate that their housing markets now exceed previous norms.




Looking at smaller metros, both Odessa and Midland, Texas, boast LMI scores of 2.0 or better, meaning that their housing markets are now at double their strength prior to the recession. Also at the top of the list of smaller metros are Casper, Wyo.; Bismarck, N.D.; and Florence, Ala., respectively.




“This index helps illustrate how far the U.S. housing recovery has come, and also how much further it has to go as we continue to face some significant headwinds in terms of credit availability, rising costs for lots and labor, and uncertainties regarding Washington policymaking,” said NAHB Chairman Rick Judson, a home builder from Charlotte, N.C.




The LMI shifts the focus from Identifying markets that have recently begun to recover, which was the aim of a previous gauge known as the Improving Markets Index, to identifying those areas that are now approaching and exceeding their previous normal levels of activity. More than 350 metro areas are scored by taking their average permit, price and employment numbers for the past 12 months and dividing each by their annual average over the last period of normal growth. For single-family permits and home prices, 2000–2003 is used as the last normal period, and for employment, 2007 is the base comparison. The three components are then averaged to provide an overall score for each market; a national score is calculated based on national measures of the three metrics. An index value above one indicates that a market has advanced beyond its previous normal level of economic activity.




“Smaller metros are leading the way to a housing recovery, accounting for 43 of the top 50 markets on the current LMI,” observed NAHB Chief Economist David Crowe. “This is very much in keeping with the results of our previous index for improving markets, and is an indication of the extent to which local economic conditions dictate the strength of individual housing markets.”




“The housing markets of 118 metros scored by the LMI this month show activity levels of at least 90 percent of their previous norms—a very encouraging sign of things to come,” said Kurt Pfotenhauer, vice chairman of First American Title Insurance Co., which co-sponsors the LMI report.




Builder Confidence Unchanged in September


Following four consecutive months of improvement, builder confidence in the market for newly built, single-family homes held unchanged in September with a reading of 58 on the National Association of Home Builders/Wells Fargo Housing Market Index, released Sept. 17.




“While builder confidence is holding at the highest level in nearly eight years, many are reporting some hesitancy on the part of buyers due to the sharp increase in interest rates,” said NAHB Chairman Rick Judson, a home builder from Charlotte, N.C. “Home buyers are adjusting to the fact that, while mortgage rates are still quite favorable on a historic basis, the record lows are probably a thing of the past.”




“Following a solid run up in builder confidence over the past year, we are seeing a pause in the momentum as consumers wait to see where interest rates settle and as the headwinds of tight credit, shrinking supplies of lots for development and increasing labor costs continue,” noted 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 in 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.




HMI component indexes were mixed in September. While the component gauging current sales conditions held unchanged at 62, the component gauging sales expectations in the next six months declined three points to 65 and the component gauging traffic of prospective buyers increased one point, to 47.




All four regions posted gains in their three-month moving average HMI scores in September, including a two-point gain to 41 in the Northeast, a four-point gain to 64 in the Midwest, a two-point gain to 56 in the South and a four-point gain to 61 in the West, respectively.




Dodge Momentum Index Gains Ground in August


The Dodge Momentum Index advanced 1.4 percent in August to 114.2 (2000=100), showing positive growth for the nonresidential building sector.




The Momentum Index, published by McGraw Hill Construction, 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 essentially leveled off during June and July, following the steady gains that were reported during the first five months of 2013. With the August increase, the Momentum Index resumed its upward track and is up 27 percent compared to the same month a year ago. While the overall economy remains sluggish, the prospects for commercial development continue to show improvement, as reflected by the growing volume of projects at the planning stage and such strengthening market fundamentals as occupancies and rents.




The August Momentum Index was bolstered by an upturn for its commercial segment, which climbed 3.7 percent. The institutional segment of the Momentum Index, meanwhile, retreated 0.7 percent in August, marking its first monthly decline since February. Gains for amusement and healthcare projects were offset by a larger decline in plans for educational buildings.




New-Home Sales Rise 7.9 Percent in August


Sales of newly built, single-family homes rose 7.9 percent to a seasonally adjusted annual rate of 421,000 units in August, according to figures released Sept. 25 from HUD and U.S. Census Bureau. The gain partly offsets a dip in sales activity that occurred in July as consumers reacted to higher interest rates.




“Consumers are adjusting to the reality of today’s higher rates following a period of record-setting lows, and today’s sales report provides evidence of that,” said Rick Judson, chairman of the National Association of Home Builders and a home builder from Charlotte, N.C. “We expect to see more buyers coming back to the market as the psychological effects of the rate gains continue to wear off, particularly since, even after the recent spike, mortgage rates remain exceptionally favorable on a historic basis.”




“Sales of new homes bounced partway back in August from an unusual low in July,” said NAHB Chief Economist David Crowe. “That said, we are only about halfway back to what would be considered a sustainable level of activity in a normal economy, and the ongoing housing recovery continues to be slowed by consumers’ concerns about interest rates, as well as weak job growth and uncertainty about what’s happening in Washington.”




Three out of four regions posted solid gains in new-home sales activity in August. Sales rose 8.8 percent in the Northeast, 19.6 percent in the Midwest and 15.3 percent in the South for the month. The West was the exception to the rule, with a 14.6 percent decline.




While the months’ supply of new homes edged down to 5.0 due to the quicker sales pace in August, the total inventory rose for a seventh consecutive month, to 175,000 units.




Global Demand for Building Boards to Reach 398 Million Cubic Meters in 2017


Global demand for building boards is forecast to rise 6.2 percent per year through 2017 to 398 million cubic meters, significantly faster than during the 2007–2012 period. Gains will be driven by recoveries in the building construction markets of many developed countries, although growth will be exaggerated somewhat by a weak 2012 base, particularly in the United States. Additionally, continued strong increases in building construction activity in developing areas, as well as increasing intensity of use, will boost demand. These and other trends are presented in “World Building Boards,” a new study from The Freedonia Group, Inc., a Cleveland-based industry market research firm.




China was the largest national market for building boards in 2012 and will see its share of global demand rise to half of the total in 2017. Continuing rapid growth and industrialization, as well as an increase in the average size of housing units in the country, will boost gains. Also, as personal incomes rise, households can better afford homes built with modern construction techniques and materials, such as building boards, thereby increasing demand.




Solid gains are also expected in the other regions of the world, particularly South America and Eastern Europe. Gains will be slightly below the world average, as the global financial crisis did not have as strong an impact as in the more developed areas, and these regions are starting from a higher 2012 base. The U.S. market for building boards is forecast to post a strong recovery after suffering severe declines between 2007 and 2012. Western Europe is also projected to see a recovery through 2017, though not as strong as that in the United States.




Structural boards (softwood plywood and oriented strand board) are expected to see faster demand growth through 2017 than nonstructural boards. Structural boards are primarily used in construction applications and were therefore hurt more by the housing market collapses of the 2007-2012 period, so demand for them will rise from a lower base. OSB, which has the same performance characteristics as softwood plywood but is generally less expensive, is forecast to see faster growth than softwood plywood through 2017 as it continues to grow in popularity worldwide and gain market share. Among nonstructural boards (particleboard, medium density fiberboard—MDF, hardboard and other boards), the fastest demand gains through 2017 are expected in MDF.




ISA Economic Indicator Index Dips


The monthly Economic Indicator Report from the Industrial Supply Association dipped somewhat in August following a big increase in July.




The ISA Manufacturers Index decreased from 63.5 percent in July to 61.6 percent, while the Distributor Index decreased from 62.0 percent to 58.6 percent. For each index, a reading above 50 percent indicates expansion, while a reading below 50 percent indicates contraction.




“This month’s results shows that ISA members are continuing to see business expansion, but at a slightly slower rate than the previous month,” said John Buckley, ISA executive vice president. “This is true for members as a whole and for those members that focus on cutting tools. The ISA Cutting Tools Manufacturer Index for August was at 61.12 percent, compared to 67.5 percent the previous month.”




For the complete report, go to www.isapartners.org/index.
Chicago Metallic Acquired by the Rockwool Group
The Rockwool Group, on behalf of its Rockfon® Group affiliate, a supplier of stone wool acoustic ceiling and wall solutions, announced Oct. 1 that it had acquired Chicago Metallic, a global provider of architectural building products and services—including metal panels and ceiling systems, suspended grid systems, and acoustical and sustainable ceiling panels. It has a network of sales and distribution channels throughout North America, Europe and Asia supported by production facilities in China, Malaysia, Belgium and the United States.




The acquisition is part of the Rockwool Group’s strategy to globalize and develop its ceiling business, which today accounts for approximately 10 percent of group revenues. Chicago Metallic supports the group’s growth in North America, as well as Asia, allowing a significant acceleration to the already ongoing expansion into these regions. The newly acquired Chicago Metallic Company™ LLC represents one of the largest acquisitions to date by the Rockwool Group.




Now that the transaction has been completed, the ownership of the business has been transferred to Rockwool International A/S. Headquartered in Hedehusene, Denmark, Rockwool International A/S reported more than $2.5 billion in revenue in 2012 and has nearly 10,000 employees across 40 countries.




In 2012, Chicago Metallic generated $139 million in revenues and employed approximately 600 employees. In recent years, its earnings before interest, taxes, depreciation and amortization (EBITDA) ratio has around 14 percent.




Ohio Appeals Court Affirms Lower Court Decision That Notice and Claims Provisions Placed “Impossible Burden” on Contractor


An Ohio appeals court on Sept. 5, 2013, affirmed a lower court’s decision granting damages to a construction contractor whose claims were initially denied when it could not meet the unworkable notice and claims requirements in its contract with a public owner.
The American Subcontractors Association and ASA of Ohio urged the appeals court to uphold the lower court’s decision in an amicus brief filed on Sept. 24, 2012, in J&H Reinforcing & Structural Erectors, Inc., v. Ohio School Facilities Commission.




The Court of Appeals of Ohio, 10th Appellate District, reviewed and overruled all 21 of the Ohio School Facilities Commission’s “assignments of error” and J&H’s three “assignments of error” and affirmed the judgment of the Court of Claims of Ohio.




On Feb. 10, 2012, the Court of Claims ruled that notice and claims provisions placed an “impossible burden” on the contractor, whose claims were denied despite substantially following the notice and claims process and writing numerous letters to the project’s construction manager detailing the impact of unforeseen site conditions and the late delivery of air handling units. The late delivery directly affected the progress of all of the other trade contractors that were to follow the installation of the units, trades whose work was required to be performed prior to the contractor’s work.




After the Court of Claims decision, the Ohio School Facilities Commission, which administers the entire Ohio Public School Building Program, appealed, and contractor J&H then cross-appealed.




In their brief, ASA and ASA of Ohio explained to the Ohio appeals court: “The Contract contained multiple differing and unworkable claim notice provisions which had the effect of placing J&H in a position where it was impossible to strictly comply when the cause of delay was beyond the control or knowledge of J&H. For example, Article 6.4.2.2 required J&H to identify all responsible parties for any delays, even if it was, as the Referee and trial court found, an ‘impossible burden on J&H’ because J&H could not know whether the [air handling unit] delay was caused by the manufacturer, U.S. Customs, the installer, the engineer, the OSFC, the Construction Manager, or some other party. Similarly, J&H did not know, and could not be expected to know, when that delay would be incurred, and whether the schedule could be revised.”




J&H entered into the construction contract with the commission and agreed to perform general trades work and other subcontracting, as well as to self-perform masonry and interior case work, on the Wheelersburg Local School District K-12 school building construction project.




“Construction schedules are generally revised by construction managers, after such delays, with input from the impacted contractors and subcontractors,” ASA and ASA of Ohio noted. “But here, the construction manager performed unilateral and undisclosed schedule revisions, without considering such input. The Construction Manager’s computer program is designed to aid in schedule adjustments … However, OSFC’s Construction Manager overrode its computer program to produce an illogical and ‘unworkable schedule,’ to the detriment of J&H.”




J&H filed its complaint against the commission seeking damages for OSFC’s breach of contract, including, among other things, costs, expenses, and losses J&H sustained as a result of numerous delays that occurred on the project. “… Upholding the Court of Claims decision will serve as a stark warning that this sort of gamesmanship will be seen for what it is and will be prohibited by the law of the State of Ohio,” ASA and ASA of Ohio wrote.




Companies in the News


Sto Corp., Atlanta, celebrates its sixth year of receiving the prestigious SHARP’s Award.




Sto Corp. continuously promotes a culture of consciousness, and as a result continues to maintain a strong commitment to safety in the workplace. This strong commitment to not only the quality of its product, but its commitment to safety has long been ingrained in the way the company operates. For the last six years this commitment has been recognized nationally with the distinctive SHARP Award, “Safety and Health Achievement Recognition Program,” for which OSHA and the Department of Labor recognizes business employers who operate an exemplary injury and illness prevention program.




According to the Department of Labor, the SHARP listing for Sto Corp. is one of only eight companies in the state of Vermont, one in 18 in the state of Georgia, and one in 21 in the state of Arizona to receive this nationally recognized award.





Armstrong Ceiling & Wall Systems, Lancaster, Pa., was honored this year with an Excellence in Advertising Award by Architectural Record magazine. This is the 14th year in a row that an Armstrong ceiling ad has been recognized for its effectiveness.




The award, which was presented during the American Institute of Architects 2013 National Convention and Design Exposition, was given to Armstrong Commercial Ceilings for the ad it ran in a first quarter issue of Architectural Record magazine.




The two-page ad, titled “A New World of Possibilities,” featured an Armstrong Ultima Create! Ceiling System, imprinted with a colorful image of the earth, installed in a public school classroom. The ad illustrates the custom design possibilities offered by this acoustical ceiling system, which allows designers to create their own one-of-a-kind ceiling art.




The award-winning ads were chosen from among the more than 150 full-page or greater ads that appeared either in print or online in Architectural Record or its sister publication Greensource during the first quarter of 2013. The awards were judged by a jury of ten architects from across the country, representing the breadth of the profession.




Products in the News


ClarkDietrich Building Systems, West Chester, Ohio, announces that its FastClip™ Slide Clip and Extended FastClip™ Slide Clip has received ICC Evaluation Service certification. The report (ESR–2570) confirms compliance with the 2012 International Building Code® and International Residential Code®, as well as the 2010 California and Florida Building Code.




ClarkDietrich FastClip Slide Clips and Extended Clips are used to attach exterior curtain-wall studs to the building structure and provide for vertical building movement independent of the cold-formed steel framing. The clips install quickly with screws or powder-actuated fasteners and the deflection screws are specifically designed to provide friction-free sliding.




E-News


CertainTeed, Valley Forge, Pa., has launched a new mobile app to support its CertaSpray® spray foam insulation. The app, which is designed for use on iOS and Android™ devices, provides installers easy access to troubleshooting and safety information, as well as useful product details.




The app’s user-friendly navigation, which earned an American Web Design Award from industry publication Graphic Design USA, includes information such as safety tips, required personal protection equipment, first aid protocol and how to handle spills. It also includes advice for dealing with potential field issues, such as off-ratio foam, temperature, reactor settings and more. For each topic, links to relevant product websites, brochures, spec sheets and instructional videos are available. The app also includes a direct link to an around-the-clock safety technical support number.




The app is available through the Apple® App Store and Google Play™. More information is available at www.certainteed.com/certasprayapp.

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