HARDI/ITR Quarterly Construction Forecast Part 2

Great Lakes

Housing permit authorizations in the Great Lakes region were up 15.4 percent in the 12 months through February. Michigan was the only state in the region to show growth trends for both single-family and multi-family units. Single family permits slowed in Ohio and Kentucky while multi-family construction made gains. Permits were below year ago levels in Indiana, West Virginia and Pennsylvania. Home prices were up across most of the region with Michigan, Ohio and Indiana having the largest increases in pricing. West Virginia prices were below its year ago level. ITR Economics forecasts permit growth of 6.1 percent for 2017, 0.3 percent for 2018 and 1.8 percent in 2019.

Nonresidential construction spending rose 25 percent in the 12 months through February to a total of $19.6 billion. Medical construction did the best in the past 12 months, increasing 78.6 percent from a year ago. The pace of growth is slowing in most nonresidential construction segments. ITR expects a continued deceleration throughout 2017 ending in a 20.9 percent decline for the year. Construction will rise again in 2018 gaining 23.6 percent before declining in the first half of 2019. The forecast for 2019 is -3.2 percent.

Central

There were 164.3 thousand housing permits issued in the Central region in the 12 months through February, an increase of 13.1 percent from the year-ago level. Multifamily housing outperformed permit issuance for single family units, up 16.5 percent compared to 6.2 percent for single family. North Dakota and Wyoming declined in both markets during the period while most of region saw permits grow in both single and multifamily. Home prices rose in the region and were generally consistent with the national average of 5.1 percent growth. North Dakota, South Dakota and Wyoming prices under-performed the national average. ITR Economics expects annual permits to rise thorough mid-2018 and then decline through mid-2019. Permit growth is forecast at 13.8 percent for 2017, 1.5 percent in 2018, and 2.5 percent in 2019.

Nonresidential construction spending was up 8 percent during the period. Commercial construction increased 24.6 percent. HARDI opportunities can be found in medical and retail construction which grew by 37.8 percent and 18.2 percent, respectively. Four of the eleven states of this region experienced declines in nonresidential construction and, in particular, North Dakota and Wyoming were down 68.9 percent and 67.4 percent, respectively. Iowa had the strongest growth. The forecast for nonresidential construction calls for a 22.7 percent decline in 2017, followed by an increase of 25.9 percent in 2018 and an 11.1 percent decline in 2019.

Southwest

Housing construction in the Southwest is currently in recovery after declining 1.8 percent from the previous 12 months. The improvement of the oil and gas industry is expected to bring mild investment growth and jobs to the region. Single family housing permits were up 4.7 percent in the 12 months through February but multifamily declined 14.0 percent. The most opportunity for HARDI firms is in Arkansas, Louisiana and Oklahoma in the near term, said ITR Economics. Home prices rose in the region but were mostly below the national average. Texas home prices were up 7.7 percent followed by Louisiana at 6.3 percent. Housing construction is expected to rise through late 2018 before declining in 2019 as part of the brief recession. Expect permits to be up 14 percent in 2017, 3.2 percent in 2018 and 1.5 percent in 2019.

Nonresidential construction is expected to decline through the end of 2017 and gain momentum through 2019 as the oil and gas industry recovers. During the 12 months through February, commercial construction fell 26.2 and retail 5.0 percent. ITR sees opportunities for HARDI members in government and education construction and in the markets of Oklahoma, Arkansas and New Mexico. Declines in the oil and gas industry last year will Texas bring construction spending down for the state in 2017. The forecast for nonresidential construction spending is a decline of 10.0 percent in 2017, followed by increases of 12.0 percent and 11.4 percent in 2018 and 2019, respectively.

West

Housing permits rose 5.1 percent in the 12 months through February in the West. Single family rates grew at the fastest pace in Idaho, California and Nevada. Multifamily made double digit gains in Oregon and Washington. Multifamily permits were down 13.6 percent in California and have fallen even further in the three months prior to the HARDI/ITR report. Home prices generally outpaced the national average increasing potential for HARDI members in the West. The housing permit forecast calls for increases over the next three years: 3.3 percent in 2017, 10.2 percent in 2018, and 0.8 percent in 2019.

Nonresidential construction spending increased 18.3 percent to a total of $40.8 million in the 12 months through February. Opportunities are available in retail and education construction says ITR Economics. ITR forecasts spending will decline in 2017 before gaining traction again in 2018. Spending will decline through most of 2019. The construction forecast is: down 22.4 percent in 2017, up 14.2 percent in 2018, and down 5.1 percent in 2019.

SMU Note: Dr. Alan Beaulieu of ITR will be a KEYNOTE SPEAKER at our 7th SMU Steel Summit Conference on August 28-30, 2017 in Atlanta. You can find more details on our website: www.SteelMarketUpdate.com/Events/Steel-Summit