10% Jump in Construction Starts for September

According to McGraw Hill Construction, the seasonally adjusted annual rate of $604.1 billion amounts to a 10% increase nationwide in September. This welcome increase follows a the disappointing yo-yo pattern of July and August, and marks the highest level in construction activity so far for 2014.

Commercial, institutional, and other non-residential construction gained sharply during September, with noticeable increases in manufacturing plants and public utility repair and refurbishment construction. Residential building, on the other hand, declined in the month-to-month numbers for the year-to date, although the 9 months of unadjusted construction starts averaged $419.5 billion, marking a 5% increase over the numbers in September 2013.

The Dodge Momentum index rose 12 points from August levels, which places it slightly ahead of July’s rating of 126, according to construction data expert McGraw Hill Construction. McGraw Hill economist Robert A. Murray explains that although construction starts dropped 10% in Q1 and 6% inQ3 for 2014, “A key factor in keeping the construction expansion going in 2014 has been the greater role now being played by non-residential building.  Commercial building has continued to see moderate growth from low levels, and the manufacturing building category is still showing a surge of chemical and energy-related plants reach groundbreaking.”

Institutional categories are up across the board, which translates to the construction of institutional structures being able to contribute to the non-residential building boom.   According to Murray, “residential building is now providing a much smaller lift than in the past two years, as the sluggish performance by single family housing has outweighed further gains by multifamily housing.”

The year-to-date drop in residential amounts to 9%, leveling off at $212.7 billion. The year’s hottest sector, multifamily housing, fell a staggering 23% from the strong August levels. September saw four major multifamily projects valued in excess of %100 million apiece, break ground. A $266 million condominium hotel in Hollywood, a $230 million multifamily project in Washington, D.C., a new condominium complex in Honolulu totaling $215 million, and a $183 million condo tower in Miami, Fl. New York, NY, Washington, D.C., Miami, FL, Los Angeles, CA, and San Francisco, CA were the five largest-spending metropolitan areas in September. 

The 3% dip in single family-housing for September is the third consecutive month of decline after the spike in late spring. The flat residential pattern nationwide for 2014 continues. Single family construction weakened by 6% in the Southeast, 4% in the Gulf Coast, and 3% in the West. However, modest gains of 2% in the Midwest and 4% in the Northeast were made.

According to Murray, “This year’s stall for single family housing means that the lift provided to total construction is much less than what occurred during the prior two years, when single family housing advanced 29% in 2012 and 26% in 2013.  The 20% down payment requirement, generally in effect since the end of the financial crisis, has made it difficult for lower and middle income households to get approved for a mortgage, and more attention is now being directed by federal officials at ways to expand access to home loans.”

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