Ups and downs.
"Through the first eight months of 2007, the construction start series has hovered around a level that is 7 percent to 8 percent below last year's average pace," says Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. "The downturn for residential building has shaped this year's pattern for overall construction activity, and with multifamily housing now joining single family housing in decline, the correction for residential building is still very much in progress. In contrast, nonresidential building and public works remain on track to register moderate growth for 2007 as a whole. The credit crunch is clearly having a negative impact on the residential sector right now, but to this point in 2007 it appears that nonresidential building has experienced only modest dampening."
Nonresidential building in August jumped 16 percent to $222.1 billion (annual rate). Much of the increase reflected a surge for manufacturing plant construction, which climbed an exceptional 508 percent from a weak July. Warehouse construction also had a strong August, growing 54 percent with the push coming from the start of a $110 million industrial center in Texas. Hotel construction advanced 20 percent in August, regaining some of the strength that had been reported earlier in the year.
Several nonresidential categories that had shown strength earlier in the year witnessed declines in August, including store construction (down 4 percent) and offices (down 28 percent). The public buildings category (courthouses and detention facilities) fell 29 percent, but on a year-to-date basis advanced 19 percent. Construction starts for healthcare facilities retreated 19 percent in August, and in this case it was consistent with the general weakening for this structure type, down 9 percent for the first eight months of 2007.
Residential building in August dropped 6 percent to $242.0 billion (annual rate), continuing the weakening trend that has been present so far in 2007. Single family housing fell an additional 7 percent in dollar terms, and on a year-to-date basis was down 26 percent. Murray says, "The single family correction is turning out to be more severe than anticipated--with home sales continuing to diminish while inventories rise, it's not expected that this market will begin to see sustained improvement for at least another year." Multifamily housing in August edged up a slight I percent, representing a brief pause in the decreased activity reported this year. August did include the start of several large apartment projects, in such locales as Washington DC ($100 million) and suburban Boston ($80 million), but the number of large condominium projects is down considerably from last year.
U.S. CONSTRUCTION CONTRACT VALUES Jan-Aug 2007 Jan-Aug 2006 % Change Residential $185.7 * $249.1 * -25% Non-Residential Const. $147.6 * $143.3 * +3% Infrastructure $91.7 * $84.6 * +8% Total $310.1 * $477.0 * -11% * in billions Source: McGraw-Hill Construction Note: Table made from bar graph.