Building industry betting on pent-up demand to boost activity
Wednesday, April 29, 2015
The beginning of 2015 was "deja vu all over again" for the building industry, as severe weather conditions in much of the country once more dampened activity for most of the first quarter. New construction, remodeling and design work all lost some momentum coming off a strong fourth quarter in 2014, although growth remained positive overall compared to a year ago.
Nonetheless, building professionals express confidence that improving economic indicators will encourage homeowners to undertake projects they have been putting off for some time. Despite somewhat erratic activity in January and February, first-quarter results from around the industry generally show an upward trend.
The analysts at Dodge report new construction starts are up 28 percent over the same period last year. Nonresidential construction starts rose 10 percent and residential starts 12 percent. The National Association of Realtors announced that existing home sales in March reached their highest annual rate in 18 months.
At the same time, the National Association of Home Builders stated that, although sales of new homes dropped in March after fairly robust business in January and February, this was the best first quarter for new home sales since 2008. The American Institute of Architects saw its Architectural Billings Index (ABI) increase in March, after disappointing results in January and February, with a healthy gain in new-project inquiries.
In announcing the results of its 2015 Home Design Trends Survey, the AIA's chief economist Kermit Baker noted, "Business conditions are as prosperous for residential architects as they have been since prior to the Great Recession. In recent years, the remodeling and renovation market was providing the bulk of the billings, but now the custom design market is also on more solid footing and positioned well for the months to come."
Remodelers also experienced year-over-year gains for the first quarter, even though business softened somewhat from the end of last year.
NAHB reported that its Remodeling Market Index (RMI) declined slightly in the first quarter of 2015, to 57, after reaching a record high of 60 in the fourth quarter of 2015. The National Association of the Remodeling Industry, in releasing the results of its first-quarter 2015 Remodeling Business Pulse, stated "NARI contractors found their current business conditions better than they were this time last year," though down somewhat from last December.
Harvard University's Joint Center for Housing Studies projects remodeling activity will decelerate somewhat in the first half of the year, due to weaker-than-expected home sales, then "gain a little more traction by year end."
All the major professional organizations say their members are optimistic that business will pick up in the months ahead and the industry will end the year on a strong note. Many believe that "pent-up demand" for better housing will create a surge in activity now that the winter weather has passed. They point to continued stability in the economy, growing employment and low interest rates as incentives for homeowners to invest either in a new home, upgrade or overdue home improvements.
That scenario could change if the Federal Reserve decides to raise interest rates or if weakening in certain sectors of the economy, such as energy, depresses demand. The industry is also facing a labor shortage and increase in materials costs that could hamper growth.
We should have a clearer picture of how the year is trending by the end of the second quarter. At present, the early signs indicate the industry should enjoy a busy spring.
- Interior design is not about flowers
- Window film improves building system performance
- Emerging green building material technologies to watch
- 3-D printing is revolutionizing construction and design fields
- Watch out for these 3 common electrical safety hazards
- Indoor lighting and its effect on emotions
- Common mistakes that lead to adhesion failure
- Skilled labor shortage impacting rebuilding efforts
- Infographic: Understanding marijuana laws, state-by-state
- Podcast: The economics of starting a practice
- The UK grapples with its low-carbon heating future
- Basketball backlash: China, Hong Kong, business and the NBA
- 5 conditioning exercises safe for young athletes
See your work in future editions
Your content, Your Expertise,
Your Industry Needs YOUR Expert Voice & We've got the platform you needFind Out How