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This report will provide information on key price movements in the U.S. economy. First will be a look at home prices, where the news is almost all good. Then the emphasis will shift to commodity prices, where the assessment of the news depends on one’s perspective. Tied to commodity prices is what has been happening to the value of the U.S. dollar in international currency markets. The bonds are fascinating and the shifts in opposite directions are not just a coincidence. The only conclusion to be reached is that prices in general are beginning to firm up.
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Construction starts fell only 1.5% in September from August after adjusting for the large seasonal decline typical at the end of the summer. This is consistent with the Reed Construction Data forecast that starts will slip very slowly lower into the winter and that construction spending will dip slightly more by year-end.
Have you heard enough bad news about the U.S. homebuilding market? Then you’ve come to the right place. It’s true that January to September starts this year were -43.7% versus January to September of last year nationwide. But look at what’s been happening over a shorter time frame. Total U.S. housing starts in the latest quarter of this year (Q3) were +9.3% compared with the previous quarter (Q2). In the Northeast, they were +7.9% in the third quarter versus the second quarter; in the Midwest, they were +21.5%; and in the South, +11.2%. Only in the West was there a further decline, -2.9%.
No doubt about it. Trying to estimate what will happen with respect to construction material costs is a tricky business. One can come at the issue from several directions. A good starting point is commodity prices. Commodities form the cornerstone for all building products.
Reed Construction Data (RCD) announced today that the year-to-date value of construction starts through September 2009, excluding residential contracts, totaled $184.7 billion, 12.8% less than in the same period in 2008. Individual month of September starts were 20.1% lower than in August so the September decline was about 7% after seasonal adjustment. Nonetheless, the starts trend has recently improved after the plunge in June, says Reed Construction Data chief economist Jim Haughey.
The construction materials price index fell 0.4% in September to 8.4% below the index value last September. Nonetheless, the price trend ahead is up. The September drop was the result of a temporary plunge in energy prices which have already risen sharply since the September survey week, says Reed Construction Data chief economist Jim Haughey.
Year-to-date housing starts (August) are down 55% from the same period a year ago in the Northeast but only 36% in the Midwest. While the recession is much more severe in the Midwest, the recession began earlier in this region with the collapse of auto sales and the exodus of auto parts production plants and arrived very late in the Northeast with the financial crisis that began in September 2008, says Reed Construction Data chief economist Jim Haughey.
Once the largest US housing market, Atlanta has experienced the largest decline in residential construction since the peak of the housing boom early in 2006. Homebuilders tried to increase their market share by using cheap credit and ignored signs of slowing sales growth. Phoenix, Riverside, Miami and Los Vegas made this list the same way, says Reed Construction Data chief economist Jim Haughey.
The housing recovery began in March 2009 after an 80% drop in starts from the peak level in January 2006. Monthly single family housing starts increased 35% from February to August but are still only 26% of the peak level nearly four years ago. Another 35% increase to 650,000 single family starts is forecast by the end of 2010, says Reed Construction Data chief economist Jim Haughey.
The US economy lost 6,929,000 jobs from December 2007 to August 2009. Monthly job losses have slowed to about 200,000/month but losses will continue into the winter with up to 500,000 more jobs lost. The unemployment rate will rise from 9.7% in August 2009 to slightly over 10% in summer 2010, says Reed Construction Data chief economist Jim Haughey.
