Rock Products

JAN 2013

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Meanwhile, the number of improving housing markets across the nation continues to show considerable ad‐ vancement. When the NAHB/First American Improving Markets Index (IMI) was launched in September of 2011, only 12 metropolitan areas out of 360 were on the list. As of December 2012, the list stands at more than 200 metro areas. The index is based on a six‐month up‐ swing in housing permits, employment and house prices. "One reason we have seen such a significant jump in the IMI is because house prices are beginning to recover," said Crowe. "House prices bottomed out early in 2011 and since early 2012 we've seen a 6 percent increase on a national basis." Another factor spurring the recovery is that household formations are on the rise. In the early part of the decade, the nation was generating 1.4 million new households each year. This collapsed to 500,000 annu‐ ally during the housing downturn and currently new households are being formed at close to a 900,000 clip per annum. "We're not up to normal, but this is adding to demand for housing," Crowe said. As new households form at a growing rate, so too does builder confidence. The NAHB/Wells Fargo Housing Market Index, which measures builder confidence in the single‐family housing market, has posted gains for eight consecutive months and now stands at a level of 47. This is very close to the critical midpoint of 50, where equal numbers of builders view the market as good or bad. The HMI has not been above 50 since April of 2006. Single‐family home starts are projected to climb to 534,000 units this year, up 23 percent from 2011. NAHB is forecasting that single‐family new‐home production will post a healthy 21 percent gain in 2013 to 647,000 units. Starts will continue their upward climb in 2014, posting a further 29 percent rise to 837,000 units. Multifamily production is expected to rise 31 percent in 2012, reaching the 233,000 level, and posting a solid 16 percent gain in 2013 to 270,000 units. Multifamily starts are anticipated to rise an additional 9 percent in 2014 to 294,000 units. Meanwhile, new single‐family home sales are expected to rise from 307,000 last year to 367,000 this year, a 20 percent rise. Sales are anticipated to climb to 447,000 next year, up 22 percent from 2012 and jump to 607,000 in 2014, a 36 percent increase over 2013 levels. E Construction Forecast Management consulting and investment banking frm FMI reports that its forecast for 2013 construction put-inplace calls for an 8 percent increase to $892 billion – the largest percentage increase since 2005 but only just returning to 2003 levels of construction in current dollars. "More positively, we expect that rate of increase to grow to 9 percent in 2014 and continue at 8 percent through 2016," said J. Randall (Randy) Giggard, managing director research services. "That growth is largely based on a significant, double-digit rebound in residential construction, but we expect other sectors like office and commercial construction to finally pull out of the doldrums as well. Even though we expect a growth rate for residential construction to reach 14 percent in 2013 and 15 percent in 2014, total residential construction won't return to 2002/2003 levels until 2016. While slow, these may be more sustainable levels, avoiding high run-ups in costs and significant drops in affordability. Nonetheless, as we reach higher levels of growth, mortgage rates and prices in hotter markets will very likely go up, thus slowing the rate of growth and speculation. These improvements in the markets will both help keep unemployment down and spur further job creation in other areas of the economy." Giggard said that one of the many potential wild cards that could either improve the construction forecast or hold it back is infrastructure construction. State and federal governments will continue to struggle with deficits and improving revenue while infrastructure, including highways, bridges, water and wastewater systems, and a number of other areas requiring modernization or replacement continue to need attention and funds. The American Society of Civil Engineers is now going beyond creating the Report Card for American Infrastructure to publishing a report called "Failure To Act: The Economic Impact Of Current Investment Trends In Surface Transportation Infrastructure." In this report, the focus is on both the economic benefit of improving infrastructure and the consequences of not acting. It is a tough case to make in a struggling economy, and it will require many voices and data to make it. If it gains traction, we could be looking at a considerable rise in infrastructure construction in the next decade. Highway and Street Funds from the MAP-21 and TIGER grants make up a large percentage of construction put in place included in FMI's 2013 forecast of $84.7 billion for highways and streets. The federal funds will also bolster transportation spending from state and private sources. While the new transportation bill encourages funding from public-private partnerships (P3), the concept of P3 projects continues to generate more talk than action, although six projects totaling $8.6 billion appear ready to reach financial close in 2012. One potential fly in the ointment is that continually passing continuing resolutions to keep the government in operation is expected to reduce funding for the new transportation program. Also, the new program is only for three years, so we expect the battle for funding to return. ROCKproducts • JANUARY 2013 21

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