Nov 14

Are We Really In a Building Recovery ?

Single-family home

Since the burst of financial and real estate markets in 2007, a major shake up has taken place in the construction world. We have all experienced it, as property owners, developers, builders, real estate agents… Demand for construction of new homes plummeted, access to construction loans just about stopped and as a result many small home builders went under.

In Europe, even large, well established companies, like Putzmeister and Schwing, two German leaders in the construction industry, were bought in 2012 by Chinese companies: Sany Heavy Industries and Xuzhou Construction Machinery Group. By taking advantage of the debt crisis and the slowing down of the market, China further established its position as new leader in the construction machinery industry.

Housing Market Recovery?  We hear on television and read in articles, that the residential market is finally starting to show signs of recovery: prices have gone up 12% per year, bidding wars are happening again, the inventory is low …

So is this really a sign that things are getting better? What is really causing this increase? It could be the result of several factors:

  1.  Interest rates are the lowest they have ever been (even though they have gone up a little.)
  2. Bidding wars are happening but mostly where inventory is really low

However, if we were really talking recovery, why then, is “the inventory of newly constructed homes is essentially at a 50-year low”, according to Lawrence Yun, Chief Economist at the National Association of Realtors?  And by the looks of it, no increase is to be expected any time soon!

Let’s look at some data…

Housing Market Data US Census

Looking at the above charts from the Census Bureau, we can see that single-family home starts is pretty much flat and there is a slight increase in the number of multifamily housing starts but well below 2008 and even 2012 levels.

Could it be that the government (read Fanny Mae & Freddy Mac) is sitting on a record high inventory of millions of foreclosed houses that are being slowly released on the market? So many, in fact, that new constructions cannot take off? Add to this, excessive government regulations and the virtual impossible access to construction loans, you get the picture!

Multi-family and single-family units are up 21% in 2013 from 2012. However, new constructions are well below the long-term average of 1.5 million new homes each year.

Building Permit Data Building permits show a slow progressive increase back to the level of 2008.  This being said, a closer look at the US census data², shows that only single family housing rose and hit a five-year high! On the other hand, 2-4 units, 5+ and multi-family are below 2008 levels. Apartments and condos went down 11.1%.

In terms of regions, the South leads, followed by the West, then the Midwest and the North East.

Cities with the most construction permits (2011-12)

Houston, Dallas, Washington, DC, New York, Austin, Los Angeles, Phoenix, Seattle, Atlanta, San Antonio.

Cities with the most construction activities (2011-12)

El Paso, Austin, Raleigh, Houston, Charleston, Dallas, Little Rock, Baton Rouge, Washington, DC, Columbia (SC)

Cities with the least construction activities (2011-12)

Detroit, Long Island, Providence, Springfield, Chicago, Cleveland, New Haven, Dayton, Toledo, Ventura County.

Cities that are building have two things in common: Besides being metro areas, all have enjoyed better than average job growth in the past 10 years and none saw real estate prices plummet during the crash. So informed builders are investing in the South, in Houston, Phoenix and Atlanta and building single-family homes to address the market needs.

So, whether you are a builder in a growing market or even a flat market, one thing is for sure, you are going to need to efficiently allocate your budget on your construction equipment to win bids and get the most out of your job.  United Equipment Sales is one of the few equipment supplier, still left standing and growing. As a result, we can guaranty to save you thousands of dollars on your next construction job. Check out our special deals this month or have your pumps repaired by us. It could cost you less to ship it to us for repair than buying a new pump. The good news is that partnering with United Equipment Sales gives you affordable options. Why wait? Call us now at (503)283-2105!