30 September 2013
At a seasonally adjusted annual rate of $490.2 billion, new construction starts in August advanced 2 percent relative to July, according to McGraw Hill Construction, a division of McGraw Hill Financial. Residential building stayed on the upward track, and nonbuilding construction (public works and electric utilities) rebounded after its loss of momentum in July. At the same time, nonresidential building retreated from its improved July amount, continuing the up-and-down pattern that’s been present during 2013. For the first eight months of 2013, total construction starts on an unadjusted basis came in at $329.4 billion, up 1 percent from the same period a year ago. If electric utilities are excluded from the year-to-date statistics, total construction starts in the first eight months of 2013 would be up 10 percent.
The August data lifted the Dodge Index to 104 (2000=100), compared to a revised 102 for July. So far during 2013, the Dodge Index has hovered within the range of 98 to 106, after averaging 103 for the full year 2012.
“On balance, the construction industry is showing modest growth in 2013, although by major sector there’s been divergent behavior,” stated Robert A. Murray, vice president of economic affairs for McGraw Hill Construction. “Housing continues to lead the way, with consistent gains reported for both single and multifamily housing. Public works has edged up slightly from last year, helped by the start of several very large projects and withstanding for now the negative impact of the sequester. New electric utility starts have fallen substantially from last year’s record volume. However, it’s been more problematic to discern this year’s trend for nonresidential building – the commercial categories are hesitantly picking up the pace, but the institutional categories are still languishing. A more solid expansion for total construction requires a greater contribution from nonresidential building, which has yet to occur.”
Residential building in August increased 4 percent to $214.1 billion (annual rate). Single family housing grew 2 percent, maintaining the steady growth that’s been present during 2013. While the month-to-month increases have been smaller than last year, the consistent gains have enabled the pace for single family housing in August to be 11 percent higher than the start of this year, and 30 percent higher than the average monthly pace reported during 2012.
Regionally, single family housing in August revealed this pattern – the Midwest, up 4 percent; the South Atlantic and Northeast, each up 3 percent; the West, up 2 percent; and the South Central, down 1 percent.
Since May, the 30-year fixed mortgage rate has moved up from 3.5 percent to 4.5 percent, but this increase in the cost of financing has not had much if any negative impact on homebuyer demand and single family construction. Multifamily housing in August jumped 12 percent, achieving the second highest monthly amount so far in 2013. The top five metropolitan areas for multifamily starts in August were New York, N.Y., Boston Mass., Miami Fla, San Francisco, and Los Angeles.
The commercial categories in August grew a combined 3 percent. Office construction increased 10 percent, lifted by the August start of several large projects – the $500 million Facebook data center in Altoona Ia, a $100 million addition/renovation to an office building in Rockville Md., and a $91 million biomedical office building in New Haven, Conn. Hotel construction in August climbed 23 percent, rebounding from a weak July with the boost coming from groundbreaking for a $95 million hotel resort in Hollywood, Fla.
The 1 percent gain for total construction starts on an unadjusted basis for the first eight months of 2013 was due to varied behavior by the three main construction sectors. Residential building climbed 27 percent year-to-date, with single family housing up 30 percent and multifamily housing up 19 percent. Non-building construction fell 21 percent year-to-date, as a steep 68 percent plunge for electric utilities outweighed a slight 2 percent increase for public works. Nonresidential building was down a modest 3 percent year-to-date, as the result of this pattern by major segment – commercial building, up 10 percent; institutional building, down 9 percent; and manufacturing building, down 14 percent.
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