http://www.reedconstructiondata.com/jim-haughey/ Reed Construction Data Chief Economist Jim Haughey discusses how current developments in the US economic environment will bring opportunities and challenges for designers, contractors, and materials and services providers. en rcdwebmaster@reedconstructiondata.com Copyright 2009 2009-06-29T20:17:00-05:00 http://www.reedconstructiondata.com/jim-haughey/post/credit-constraint-on-us-recovery-soon-ahead/?nid=4268 http://www.reedconstructiondata.com/jim-haughey/post/credit-constraint-on-us-recovery-soon-ahead/#When:20:17:00Z The US economy and hence the construction market is in a sweet spot in mid 2009. The automatic recession correction mechanisms are working quickly to trim costs and inventory enough to return to growth in aggregate spending within a few months. Yet spending, here and elsewhere, remains depressed enough so that the recent worldwide reduction in credit availability is not yet restraining aggregate spending. But a credit constraint that restrains spending growth is likely to appear as soon as yearend and certainty by mid-2010. Market Insights, Construction Forecasts, Economy & Finance 2009-06-29T20:17:00-05:00 http://www.reedconstructiondata.com/jim-haughey/post/home-prices/?nid=4268 http://www.reedconstructiondata.com/jim-haughey/post/home-prices/#When:19:35:00Z Home prices fell 0.1% in April in the Federal Housing Finance Agency (FHFA) index for home purchases. Home prices were 3.6% below a year ago. The index has been approximately steady so far this year consistent with steady reports for housing starts and the slight upward trend for home sales. This is more evidence that the national housing recession has bottomed with a gradual upturn likely in the summer. But major regional differences still exist. Market Insights 2009-06-23T19:35:00-05:00 http://www.reedconstructiondata.com/jim-haughey/post/highway-construction-stimulus-funds-diverted-to-cover-shortfalls-in-baselin/?nid=4268 http://www.reedconstructiondata.com/jim-haughey/post/highway-construction-stimulus-funds-diverted-to-cover-shortfalls-in-baselin/#When:13:53:00Z A share of the $30 billion in stimulus highway construction funds will be a substitute for baseline federal highway construction spending rather than an addition to it. When the current six year federal highway funding program expires in three months the new plan will not be in place yet. Expect Congress, after some delay, to extend funding at the current level for few months at a time using appropriations from general funds to supplement the nearly bankrupt Federal Highway Trust Fund. The funding uncertainty will delay state DOT contract awards later this year and for much of next year. Market Insights, Commercial Building & Heavy Engineering, Economy & Finance 2009-06-22T13:53:00-05:00 http://www.reedconstructiondata.com/jim-haughey/post/obama-plans-to-tighten-grip-on-financial-market/?nid=4268 http://www.reedconstructiondata.com/jim-haughey/post/obama-plans-to-tighten-grip-on-financial-market/#When:16:02:00Z The president seeks to seize control over monetary policy, any business involved with or related to lending and the terms or every loan contract. President Obama’s financial regulation plan keeps all but one of the regulatory agencies that failed to foresee the credit bubble that burst in 2008. The plan expands federal regulation to virtually all consumer and business credit transactions and moves the authority to take emergency actions to preserve the integrity of the financial system from the Federal Reserve Board to the Treasury. Market Insights, Construction Forecasts, Economy & Finance 2009-06-18T16:02:00-05:00 http://www.reedconstructiondata.com/jim-haughey/post/materials-cost-for-single-family-construction-rising-again/?nid=4268 http://www.reedconstructiondata.com/jim-haughey/post/materials-cost-for-single-family-construction-rising-again/#When:18:46:00Z The price index for materials used in single family house construction inched up 0.1% in May after dropping 5.3% over the last seven months. The Producer Price Index (PPI) for single family construction is calculated monthly by the Bureau of Labor Statistics from a survey of manufacturers and wholesalers. Energy and metals rose enough to offset declining prices for plywood, lumber and gypsum products. Materials cost rose more substantially for other construction sectors including a 2.1% monthly gain for highway construction and a 0.2% increase for multi family construction. Market Insights, Costs & Materials, Economy & Finance, Housing 2009-06-16T18:46:00-05:00 http://www.reedconstructiondata.com/jim-haughey/post/may-single-family-starts-jump-to-six-month-high/?nid=4268 http://www.reedconstructiondata.com/jim-haughey/post/may-single-family-starts-jump-to-six-month-high/#When:15:44:01Z Single family housing starts increased 7.5% to 401,000 in May, the highest monthly total since last November. There was a similar 8% rise in permits to 408,000. The increase was 12% from last months’ initial lower estimate of starts by the Census Bureau. Residential development remains depressed but is clearly improving from the cyclical low during the winter. However, the parallel 62% surge in May multi family starts has a different interpretation. It is a bounce back from a similar plunge a month earlier. Multi family starts remain at the lowest level in many decades in a market that is not yet ready to improve. Market Insights 2009-06-16T15:44:01-05:00 http://www.reedconstructiondata.com/jim-haughey/post/job-cuts-drop-abruptly-in-may/?nid=4268 http://www.reedconstructiondata.com/jim-haughey/post/job-cuts-drop-abruptly-in-may/#When:17:37:00Z As bad as it was, the May jobs report that jobs cuts were nearly halved from recent months to 345,000 is more confirmation that the freefall in the economy ended in the spring. Contractors laid off 59,000 workers, the smallest monthly job cut since last September. Manufacturers cut 156,000 jobs, reducing production to absorb surplus inventory. Other employers were catching up with staff adjustments to reduced sales levels. Construction will largely be in a staff adjustment mode, rather than panic mode, in a month or two and manufacturing a month or so later. So overall monthly job losses will progressive decline to zero at the end of the year. Market Insights 2009-06-05T17:37:00-05:00 http://www.reedconstructiondata.com/jim-haughey/post/rising-foreclosure-rate-restrains-housing-starts/?nid=4268 http://www.reedconstructiondata.com/jim-haughey/post/rising-foreclosure-rate-restrains-housing-starts/#When:12:00:00Z Recession has replaced the 2004-06 bad underwriting and fraud as the principal driver of home foreclosures. This means that the foreclosure count will continue to rise even though the absolute number of foreclosures due to rate resets from initial teaser mortgage rates, abandonment of speculative properties and quick defaults on mortgages that were never affordable continue to decline. Foreclosures are a lagging indicator. Typically, the number of foreclosures keeps growing for at least a few months after employment begins to expand which is 5-8 months ahead. As a result, homebuilders will be competing with an excess of existing homes for sale through late 2010 or beyond. This will restrain starts for several years after homebuilders have cleared out their own surplus inventory. Market Insights, Economy & Finance, Housing 2009-06-05T12:00:00-05:00 http://www.reedconstructiondata.com/jim-haughey/post/rising-inflation-could-derail-the-expansion/?nid=4268 http://www.reedconstructiondata.com/jim-haughey/post/rising-inflation-could-derail-the-expansion/#When:16:22:00Z A recession as abrupt and deep as the current one usually leads a similarly quick recovery for a “V” shaped bottom to the business cycle. But the decision to fight the recession with a massive expansion of government will edge the business cycle in a “U” shape with a longer bottom and a more gradual recovery. There is a rising risk that the business cycle may end up shaped like an “L” or a “W” if the recession continues to be used as the rationale for expanding government. An “L” would mean a very long time at the bottom. A “W” would mean and initial recovery then a relapse into recession again. What happens depends on the course of inflation over the coming year? Market Insights, Economy & Finance 2009-06-04T16:22:00-05:00 http://www.reedconstructiondata.com/jim-haughey/post/construction-wage-gains-weaken/?nid=4268 http://www.reedconstructiondata.com/jim-haughey/post/construction-wage-gains-weaken/#When:12:45:00Z Construction wage gains are now slowing quickly less than a year after construction spending began to decline. The buyers’ market for construction labor will continue through most of next year. Multiyear contracts negotiated in the next eighteen months will have slim wage gains into 2012. Wages gains progressively accelerated from a 1-2% annual pace in 2003-04 to nearly 5% in 2006-07 and have now slipped to 4.4% pace over the last year. More slowdown is expected, driven partly by wage cuts in some key markets. Market Insights, Costs & Materials, Economy & Finance 2009-06-02T12:45:00-05:00