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Wednesday, December 26, 2012

Existing home sales jump in November

Existing home sales jumped 5.9 percent in November, pulling sales up to a 5.04 million-unit pace. Home prices also increased, with the median price rising 10.1 percent over the past year, reflecting fewer distressed sales.

Architectural Billings Index Gains for Fourth Straight Month, Positive Conditions for all Sectors

Washington, D.C. – December 19, 2012 – Billings at architecture firms across the country continue to increase. As a leading economic indicator of construction activity, the Architecture Billings Index (ABI) reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the November ABI score was 53.2, up from the mark of 52.8 in October. This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 59.6, up slightly from the 59.4 mark of the previous month.

“These are the strongest business conditions we have seen since the end of 2007 before the construction market collapse,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “The real question now is if the federal budget situation gets cleared up which will likely lead to the green lighting of numerous projects currently on hold. If we do end up going off the ‘fiscal cliff’ then we can expect a significant setback for the entire design and construction industry.”

Key November ABI highlights:
• Regional averages: Northeast (56.3), Midwest (54.4), South (51.1), West (49.6)
• Sector index breakdown: multi-family residential (55.9), mixed practice (53.9), commercial / industrial (52.0), institutional (50.5)
• Project inquiries index: 59.6

The regional and sector categories are calculated as a 3-month moving average, whereas the index and inquiries are monthly numbers.

November Housing Starts

Housing starts fell 3.0 percent in November to an 861,000-unit pace. Single-family starts fell 4.1 percent and multifamily fell 1.0 percent. Even with November’s drop, the past three months were the best in four years.

Wells Fargo's November Housing Summary

Expectations for home sales and new home construction have increased considerably in recent months as the underlying fundamentals have improved. Housing is one of the few areas of the economy that has been left essentially unshaken by the uncertainty surrounding the fiscal cliff. We have repeatedly noted that home sales and new home construction will almost certainly strengthen in 2013, even if overall economic growth decelerates.  This apparent contradiction owes itself to the slow but steady improvement in the operating fundamentals for the housing market, including 33 straight months of private sector job growth and rising housing formations. Steady buying by investors has also helped reduce distressed home inventories. With supplies dwindling, home prices have improved across much of the country, which is helping bring trade-up buyers back into the market.

Housing Starts and Permits for October

Housing starts followed up a 15.1 percent jump in September, rising
3.6 percent to a 894,000 unit pace in October. An 11.9 percent gain
in multifamily starts accounted for the entire gain, as single-family
starts dropped 0.2 percent, the first decline in three months. We
expect housing starts to pull back in November, declining to a
865,000 unit pace. While part of the decline will be payback from
such strong starts the two months prior, we have seen some
indication of a moderation in starts in other economic data.

Building permits, an indicator for future construction, fell
2.7 percent in October, and November’s employment report showed
construction of residential buildings employment shrinking
1.2 percent

Residential construction is one area of the economy poised to
improve in 2013. We expect single-family starts to rise nearly
27 percent and multifamily starts to jump 32 percent in 2013.

Wednesday, December 12, 2012

3Q Commercial Report

Our forecast calls for real GDP growth to slow to a 1 percent pace or less during the final quarter of 2012 and the first half of 2013. The slowdown is primarily due to increased uncertainty, which has caused businesses, both large and small, to put off key decisions on capital spending and hiring. What little strength is present in the economy appears to be broadening. Residential construction is one clear area of improvement, and gains in homebuilding should ultimately follow through to commercial construction as well.
The sluggish economic recovery has kept commercial real estate in the slow lane. All property types have seen some improvement, thanks mostly to record low levels of new construction. Apartments have seen the greatest improvement, benefiting from increased household formations and tighter mortgage underwriting standards. Warehouse and industrial markets have also seen demand improve. Vacancy rates have improved much less in the office and retail sectors.