Housing still in the dumps

According to Reed Construction Data, the housing market continues to be depressed in most parts of the country amid increasing signs that current activity has hit bottom, although a small amount of further decline is expected in the next few months. No significant improvement from the current starts volume is expected until well into next year. Home affordability is above average and rising, but this is not enough to initiate a market recovery because the confidence to buy a new home has recently worsened rapidly. Some of the key remodeling drivers have also recently soured, but it is not yet clear whether this signal is real or a measurement problem in a chaotic market. Builder margins remain depressed as home prices have declined more than construction costs and unavoidable overhead is spread over a smaller volume. Labor cost inflation has softened and will likely soften a little more, but it has not turned negative in most markets. Similarly, a six-month respite in rising materials costs for residential builders appears to be over. (See Reed Construction Data’s related story entitled, “Construction Inflation Soars in November”.) Suppliers have reduced discounting after production cuts put inventories back in better balance. In addition, costs for materials from commodities priced in still rapidly expanding world markets are relentlessly increasing. The falling value of the U.S. dollar also contributes to commodity inflation. Your comment?

Happy Holidays

On behalf of everyone at Pit & Quarry, A very Merry Christmas and a Happy New Year to you and yours.

Republicans roadblock roads report

According to NSSGA, last week, Sen. Patty Murray (D-Wash.) made another unanimous-consent request to bring up the FY '08 transportation and housing conference report but was rebuffed by Sen. Arlen Specter (R-Pa.), who objected. On Nov. 15-16, similar requests were rebuffed by Republicans. Those attempts came after the House passed the conference report Nov. 14 by a vote of 270-147, a few votes short of the two-thirds necessary to override a veto. Specter did not explain why he objected, but the administration did oppose spending more than the president requested, along with the numerous earmarks included in the bill. It is unlikely that the transportation spending bill conference report will be considered as a stand-alone measure at this juncture. Most likely, it will be included in the larger omnibus bill Democrats are packaging. Regardless, NSSGA will continue to press for passage of the transportation funding provisions to ensure the money guaranteed by SAFETEA-LU is allocated. Your comment?

Construction outlook

The Construction Outlook, a quarterly construction market forecast developed by FMI’s Research Services Group, notes that FMI is not yet predicting a national recession or a downturn in nonresidential construction in 2008, although the outlook is tipped slightly downward.

Nonresidential construction was booming in 2007 and will increase again in 2008, although at a slower rate, the report notes. Nonresidential construction will expand at a 5 percent rate in 2008 and a 4 percent rate in 2009 as the declines in residential begin to lower demand for certain nonresidential segments, the report predicts.
 
“There are several drags on the economy such as housing and credit tightening. However, resilient consumers, businesses and exports have so far been able to prop it up,” said Heather Jones, construction economist for FMI’s Research Services.
 
The report also comments on the housing correction. It is not expected to begin recovering until 2009, the report states. However, FMI believes that put in place construction will realize a smaller decline than housing starts due to rising labor and material costs, upgrades and the use of higher-end materials. Despite large declines in total residential and single family construction, both will remain at a high level.
 
For more information about Construction Outlook: Fourth Quarter 2007, or to schedule an interview with Heather Jones, contact Candace Robertson at FMI Corporation at 919-785-9359 or crobertson@fminet.com . Your comment?

Dark clouds, no silver lining

According to Daniel C. North, chief economist for Euler Hermes ACI: “Gasoline prices are high, housing prices are low, the dollar is crumbling, consumer confidence is plummeting, holiday sales have been mixed at best, credit is drying up, bankruptcies and foreclosures are on the rise, the employment situation is decaying and conditions in the housing industry are getting worse,” he said. “It is a potent combination [that] could lead the economy into a recession in the first half of next year.” Anybody have some good news? Your comment?

Down goes production

USGS has released it's latest production report. An estimated 778 million metric tons (mt) of total aggregates was produced and shipped for consumption in the United States in the third quarter of 2007, a decrease of 11 percent compared with that of the same period of 2006. The estimated output of aggregates produced for consumption in the first 9 months of 2007 was 1.96 billion mt, a 15 percent decrease compared with that of the same period of 2006.

An estimated 436 million mt of crushed stone was produced and shipped for consumption in the United States in the third quarter of 2007, a decrease of 11 percent compared with that of the same period of 2006. The estimated output of crushed stone produced for consumption in the first 9 months of 2007 was 1.1 billion mt, a 15 percent decrease compared with that of the same period of 2006.

The estimated U.S. output of construction sand and gravel produced and shipped for consumption in the third quarter of
2007 was 340 million mt, a decrease of 13 percent compared with that of the same period of 2006. The estimated output of construction sand and gravel produced for consumption in the first 9 months of 2007 was 852 million mt, a 15 percent decrease compared with that of the same period of 2006.