Homes at the heart of confirmed recovery
- Written by Don Marsh
This year holds strong indicators for a market segment critical to concrete volume, one where most producers have seen a five-year demand curve 50 percent or more off 2007 figures.
As measured in new start data and existing property sales prices, strength in home building was confirmed by the U.S. Census Bureau, Department of Housing and Urban Development, and National Association of Realtors just as the International Builders’ Show was set to open. Attendance at the National Association of Home Builders’ late-January gathering and this month’s World of Concrete—both at the Las Vegas Convention Center—will reinforce a business outlook industry economists now view more favorably than a few months ago.
Portland Cement Association Chief Economist Ed Sullivan raised his initial projection for 2013 cement consumption and concrete demand from 6 percent to 8.1 percent above 2012 levels, and confirmed that last year’s powder shipments should eclipse the prior year’s by 8.9 percent. The 2.1 percent upward adjustment for this year reflects stability in light of markedly more optimistic residential building assessments; federal lawmakers’ fiscal cliff accord; and, recognition of stronger economic momentum.
“Growth in 2013 cement consumption will be largely driven by gains in residential construction,” Sullivan explains. “Housing starts should reach nearly 950,000 units, with single family construction near 700,000 starts. The possibility of one million starts in 2013 should not be dismissed.” A fiscal cliff hangover will affect building and construction the first six months of this year, he adds, but “We are decidedly optimistic about second half economic growth, job creation and consumer sentiment—all of which translate into a stronger home sales and starts activity.”
The National Association of Realtors’ preliminary figures show existing-home sales of 4.65 million last year, up 9.2 percent from 2011. That represented the strongest year-over-year increase since 2004, and highest volume in five years, based on 2007’s 5.03 million existing-unit sales. “Record low mortgage interest rates clearly are helping many home buyers, but tight inventory and restrictive mortgage underwriting standards are limiting sales,” says Realtors Chief Economist Lawrence Yun. “Potential buyers who stayed on the sidelines during the recession started entering the market early last year as their financial ability and confidence steadily grew, along with home prices. Likely job creation and household formation will continue to fuel that growth.
In his mid-January revised forecast, Sullivan noted broad-based recovery, with all 50 states likely to see increases in single-family housing activity this year, plus prospects for even stronger growth in 2014 home building activity, as single-family and multiunit starts could exceed 1.1 million. Already underway in the interior U.S., accelerated building has begun to appear in Southeast and Southwest regions hard hit by the housing bubble burst. Although they are starting from depressed levels, the regions are now likely to lead growth in coming years as home building rates consistent with demographic profiles resume. That activity in turn will support projections Sullivan has upwardly revised for 2015–2017, where cement consumption and concrete demand could pace annual growth rates above 9 percent.
Concrete producers need more than home building activity gains to see a return to the industry’s 2005–2006 peaks, but the numbers and news that have carried into this new year offer a buzz that has been absent for too long, just ask World of Concrete and International Builders’ Show attendees.