Light at the end of the tunnel?
The recession is far from over, but the end of the year may bring relief to the construction industry and the companies that serve it, economists participating in Reed Construction Data’s 2009 Market Insights Webcast said.
“It looks like the bottom for the economy is going to be in the summer or early fall,” said Dr. Jim Haughey, chief economist for Reed Construction Data. Total construction spending is likely to hit bottom toward the end of this year. Residential home starts will probably hit bottom in the summer of ’09.
Haughey said residential construction spending should hit bottom late this summer or in early fall, becoming perhaps the first construction industry sector to begin the recovery process after a long recession.
Non-residential starts will probably hit bottom later in the fall of this year, and non-residential spending continuing to slip into next winter before finding its floor. “All this presumes that the overall economic stimulus bill is enacted reasonably soon, and the money is spent reasonably quick,” he said.
The stimulus is one of two financing elements that will immediately impact construction. At the time of the presentation, the stimulus included provisions that should drive $12 billion to $15 billion in non-residential construction spending in 2009, Haughey said. It was approved by the House of Representatives on Wednesday.
The other major outside influence on construction is credit, and the prognosis there is improving, but Haughey cautioned that the finance industry worldwide continues to face challenges for many quarters to come. Still, rate premiums for less than prime borrowers, running three percent to six percent now, could fall to two percent to four percent later this year.
“The main problem a lot of borrowers face today, particularly contractors and some construction suppliers as well, is that the assets they offer to the bank as collateral have depreciated,” Haughey said. “Homeowners have houses they can’t sell, land that’s overvalued, and banks are reluctant to take that. Credit access is going to be a restraint on the economy for several years and be particularly severe in the next three to six months.”
Ken Simonson, chief economist for ACG of America, said materials and components prices will remain under pressure this year with diesel remaining below ’07 levels and steel returning to where it began ’08 unless a proposed Buy American provision in the stimulus package has an impact. Lumber and plywood prices should fall and remain below their 2008 prices, as should copper, with concrete holding flat. However, he warned, commodity prices won’t stay down for long.
“By 2010, as world economy picks up speed, we’ll be back in the soup again,” Simonson said.
Foxworth-Galbraith closes two yards
Foxworth-Galbraith, the four-state chain of lumberyards and truss plants, has closed a store in Grand Junction, Colo., and a truss plant in Delta, Colo., according to an article in the Grand Junction Sentinel. The company blamed the economic slowdown and record low housing starts for the closures.
According to its Web site, the Dallas-based pro dealer still has four remaining locations in Colorado: Woodland Park, Western Slope, Colorado Springs and Pueblo. Foxworth-Galbraith also operates units in Arizona, southern New Mexico and Texas.
Housing starts in some areas of Colorado have hit 25-year lows. Home sales in the Denver metro area in November 2008 were the worst on record.
84 Lumber pulled out of the Denver market earlier this month when it shuttered its yard and truss plant in Henderson, Colo. (Its one remaining Colorado location is in Grand Junction, where Foxworth is pulling out.) Other 84 Lumber closings reported on Jan. 11 were in Lafayette, Ind.; Stockertown, Pa.; Georgetown, Del.; Massillon, Ohio; McFarland, Wis.; Redmond, Ore.; and Savannah, Ga.
ANSI unveils National Green Building Standard
The American National Standards Institute (ANSI) approved a National Green Building Standard for all residential construction work including single-family homes, apartments and condos, land development and remodeling.
The consensus committee deliberated the content of the standard for more than a year, held four public hearings and evaluated more than 3,000 public comments in the development of the standard. The work of the consensus committee was administered by the NAHB Research Center, an ANSI Accredited Standards Developer.
“The National Green Building Standard is now the first and only green building rating system approved by ANSI, making it the benchmark for green homes,” said Ron Jones, who chaired the consensus committee charged with developing the standard.
“The standard provides home builders and remodelers with a much more expansive third-party rating system that they can use to achieve green certification under NAHBGreen and the National Green Building Certification Program,” said Mike Luzier, CEO of the NAHB Research Center.
The Research Center provides certification for NAHBGreen projects, which until now have only included single-family homes. “Consumers are looking for authentic, verifiable green building practices, and now they’ll find them with a true industry consensus standard for residential green building,” Luzier said.
The standard defines what green practices can be incorporated into residential development and construction and how homeowners can operate and maintain their green homes.
The National Green Building Standard also provides for flexibility — allowing home builders and home buyers to make green choices based on climate and geography as well as style preferences and budget.