Rock Products

NOV 2012

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Construction Takes A Leap Forward By Mark S. Kuhar Nationwide production and permitting of new homes rose sharply in Septem‐ ber to their highest levels in more than four years, according to newly released figures from HUD and the U.S. Census Bureau. Meanwhile, new construction starts in September climbed 16 percent to a seasonally adjusted annual rate of $507.2 billion, it was reported by Mc‐ Graw‐Hill Construction, a division of The McGraw‐Hill Companies. New Home Construction A 15 percent gain brought the pace of new housing construction to a seasonally adjusted annual rate of 872,000 units, while an 11.6 percent gain brought the pace of permit issuance to 894,000 units. These were the strongest numbers seen in both categories since July of 2008. "Today's strong report corresponds with the significant gains we've seen in builder confidence over the past year, and confirms our view that a housing recovery is solidly underway in a grow‐ ing number of markets nationwide," added National Association of Home Builders Chief Economist David Crowe. "That said, we are now almost at the half‐way mark in terms of what would be considered a normal amount of new‐ home construction in a healthy econ‐ omy, and we need to see consistent improvement like this over an extended period to get back to where the market should be in terms of generating jobs and economic growth." The overall gain in new‐home con‐ struction in September was reflected across both the single‐ and multifamily sectors, with the first posting an 11 percent gain to a rate of 603,000 units – the best pace since August of 2008 – and the second posting a 25.1 percent gain to a rate of 269,000 units – the 32 ROCKproducts • NOVEMBER 2012 best pace since September of 2008. Combined single‐ and multifamily starts rose in all but one region of the country in September, with a 6.7 percent gain in the Midwest, a 19.9 percent gain in the South and a 20.1 percent gain in the West. Only the Northeast posted a de‐ cline, of 5.1 percent. Issuance of new building permits, which can be an indicator of future building activity, also registered significant gains in both the single‐family and multifam‐ ily sectors in September. Single‐family permits rose 6.7 percent to a seasonally adjusted annual rate of 545,000 units while multifamily permits rose 20.3 percent to 349,000 units. In both cases, these were the highest permit numbers since July 2008. Regionally, permit is‐ suance rose across the board in Septem‐ ber, with the Northeast posting a 6.0 percent gain, the Midwest posting a 19.5 percent gain, the South posting a 10.5 percent gain and the West posting an 11.3 percent gain. Construction Starts New construction starts were paced by the nonbuilding construction sector (public works and electric utilities), helped in particular by a massive natu‐ ral gas plant and several very large elec‐ tric utility projects. Meanwhile, nonresidential building re‐ treated after its improved performance in August, and residential building eased back slightly. Through the first nine months of 2012, total construction starts on an unadjusted basis came in at $349.6 billion, up 5 percent compared to the same period a year ago. "The robust pace for electric utility and gas plant construction during 2012 has occasionally produced volatility for total construction on a month‐to‐month basis," stated Robert A. Murray, vice president of economic affairs for Mc‐ Graw‐Hill Construction. "If electric utilities and gas plants are excluded, the level of construction starts in 2012 would be up 2 percent year‐to‐date, helped by this year's fur‐ ther growth for multifamily housing and the emerging recovery for single family housing. As for the other con‐ struction sectors, commercial building has shown some strengthening during 2012 – while its dollar amount has grown less than 1 percent year‐to‐date, square footage is up 16 percent. How‐ ever, decreased activity continues to be reported in 2012 for institutional building, manufacturing plants, and public works. Going into 2013, it's not expected that electric utilities will be able to maintain the record pace wit‐ nessed in 2011 and 2012, and tight government budgets will restrain the institutional building and public works sectors. It will be up to housing and commercial building to provide up‐ ward momentum, and the impending 'fiscal cliff' makes continued growth for Monthly Construction Starts (Seasonally Adjusted Annual Rates, In Millions of Dollars) Sept 2012 August 2012 % Change Nonresidential Building $139,014 Residential Building Nonbuilding Construction $197,875 Total Construction $170,310 $507,199 $146,032 $172,221 $118,421 $436,674 -5 -1 +67 +16 www.rockproducts.com

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