Dodge Momentum Index shows commercial/institutional split
Materials prices and delivery problems continue to rise sharply. One reader received a letter on Tuesday from a southern-based structural-steel distributor that reported that, since August, prices for hollow structural section (HSS) “tube/pipe products have increased 56%. WF [wide-flange] prices have increased 24%.. While these materials are available, lead times for these products have been extended. These increases and extended lead times are forecast to continue into second quarter [Q2] of the year, potentially further.” Trade publication Random Lengths reported today that its framing-lumber composite price hit an all-time high of $963 per 1000 board-feet today, eclipsing the record set last September and more than double the year-earlier level. The nationwide average price of diesel fuel increased by 6.3 cents per gallon to $2.80, the Energy Information Administration reported last Monday. The increase marked “the 14th straight week with a gain and the largest rise in nearly 17 months,” trade publication Transport Topics reported on Tuesday, although the price on Monday was 11 cents (3.4%) less than a year earlier. Readers are invited to email price and supply-chain information to [email protected]
The Dodge Momentum Index increased 3.1% in January from the revised December reading, Dodge Data & Analytics reported on February 5. The index “is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. The commercial component of the Momentum Index moved 9.9% higher, offsetting an 11.7% decrease in the institutional component. January’s increase marked the highest level in the Momentum Index since the COVID-19 pandemic began. While certainly positive news, the Momentum Index is also sending a warning that the construction sector’s recovery may be very uneven in the months ahead. Institutional planning hit its lowest level since the Momentum Index began in 2002 as state and local governments pull back on building plans in the wake of growing budget deficits. Conversely, commercial planning is at its highest level since before the Great Recession, fueled by an increasing number of warehouse projects and to a somewhat lesser degree office projects. On a year-over-year [y/y] basis the overall Momentum Index is 2.2% below January 2020. The commercial component is up 12.3%…, while the institutional component is down 27.7%..”
There were 195,000 job openings in construction, not seasonally adjusted, at the end of December, down 9.7% from December 2019, BLS reported on Tuesday in its latest Job Openings and Labor Turnover Survey (JOLTS) release. Hires in December totaled 261,000, down 1.1% y/y. Layoffs and discharges declined 30% y/y to 170,000. “Over the year, the…industries with the largest decreases [were] construction; transportation, warehousing, and utilities; and retail trade.” Quits increased 18% y/y to 162,000. JOLTS data combines nonresidential construction with residential; the latter most likely accounts for a disproportionately large share of hires and openings. BLS reported on February 5 that residential construction employment increased 0.9% y/y from January 2020 to January 2021, while nonresidential employment decreased 5.4%.
“Every metro area tracked by the National Association of Realtors through [Q4] 2020 witnessed home prices grow from a year ago,” the association reported on Thursday. Of the 183 metros, 88% “(161 areas) saw double-digit price increases. For comparison, only 115 metro areas saw such growth” in Q3. Rising existing-home prices add to demand for new single- and multifamily residential construction and (with a lag) increase the property-tax base that supports school and other public construction.
An analysis by CoreLogic of new-home closings from Q4 2019 to Q3 2020 posted on Monday found, “The largest numbers of new-home sales were in large metros in the South and the West, in markets that have had large population gains….The Dallas and Houston metros top the chart in the most recent 12-month period with more than 30,000 new-home settlements. Phoenix and Atlanta each had more than 20,000 new-home closings. We identified 13 markets that had at least 10,000 new-home sales in the past year, and all were in the South or the West. The metros that had the largest annual percentage growth in new-home sales were smaller markets in the South and West. Of the 10 fastest-growing new-sales markets, five were metros in Texas, Florida, or Arizona, the three states with the largest population gains last year.” McAllen and Lubbock, Texas, each had increases of nearly 50%, followed by Crestview, Fla.
Within metro areas, research posted on January 28 by Freddie Mac found “60% of the MSAs [metropolitan statistical areas] had faster suburb growth than city growth [of population from 2009 to 2019. In] some of the fastest growing places such as Boise, Idaho and Provo-Orem, Utah, we find that the suburbs are growing faster than the city, while in areas such as Cape Coral, Fla., Midland, Texas, and Bend, Ore., the growth is taking place in the cities as compared to the suburbs. Most of the MSAs in Texas are witnessing a faster growth in suburbs than in the cities. On the other hand, places such as Baltimore are witnessing declining city growth along with increasing suburban growth. Chico, Calif. stands out as the only place that has high city growth and declining suburb growth. This trend has been mainly attributed to resettlement in the city following the rising wildfires in neighboring areas.” A blog posted on Monday notes, “Population growth increases the demand for housing supply, and if the current supply cannot meet the growing demand, then the result is home-value appreciation. But in the long run, the deep forces of supply and demand, including demographic-driven demand, shape the housing market, the cost of housing, and ultimately, who lives where and in what type of housing. –
DATA DIGEST – Ken Simonson – Vol. 21, No. 6 · February 8-16, 2021