February Construction Insider: Firm builder confidence, coronavirus threat to supply chains, more

February Construction Insider: Firm builder confidence, coronavirus threat to supply chains, more

March 2, 2020

Construction Insider is a monthly roundup of the latest news and insights in construction.

Construction confidence index stays steady in January

Construction contractor confidence remains steady in the beginning of 2020 following a surge in Construction Confidence Index (CCI) in November 2019. ABC

  • Growth expectations among construction leaders stayed above the threshold for all areas, including profit margins and sales expectations, according to CCI data from the Associated Builders and Contractors (ABC).
  • ABC reported that 70 percent of contractors have high expectations for sales increase in the first half of 2020, while nearly 50 percent also expect their profit margins to rise.
  • The reported expectations were still relatively subdued, especially with regard to profit margins, according to ABC Chief Economist Anirban Basu.
  • “Though materials prices have been generally stable and energy prices have declined recently, workers are becoming more expensive, both in terms of wages and benefits,” said Basu.

Single-family home sales reach 12.5-year high

Sales for new single-family residential units rose by 7.9% in January with 746,000 units sold, corresponding to a 12-year high record, according to data from the Commerce Department. CNBC

  • The increase in single-family home sales could be an indicator of a strong housing market despite recent blows in the economy due to the coronavirus issue.
  • The coronavirus epidemic has been reported to rattle financial markets as supply chains for manufacturers have been disrupted.
  • While home sales could be volatile on a month-to-month basis, the housing sector continues to improve with the support of cheaper mortgage rates after the Federal Reserve cut interest rates thrice in 2019.

Builder confidence remains firm in February

Builder confidence index was locked at 74 in February, indicating a solid builder confidence level despite being one point lower than January’s data. NAHB

  • There is a high demand for new construction but builders still struggle with the increases in construction and development costs, according to National Association of Home Builders (NAHB) Chairman Dean Mon.
  • Regulatory constraints and shortage of construction workers are some of the issues builders face, said Mon.
  • The housing market index (HMI) index from NAHB also reported a one-point decrease in three areas: current sales conditions (80), sales expectations in the next six months (79) and traffic of prospective buyers (57).

Coronavirus expected to hurt supply chains

The coronavirus crisis could affect construction sites and development pipelines, Bisnow reports. Bisnow

  • At least two general contractors have had materials caught up in ports due to the coronavirus, said Hoffman & Associates Executive Vice President Maria Thompson at a Bisnow event. The impact of the coronavirus crisis on US real estate has so far been concentrated on companies that have direct supply ties to China.
  • “It takes three-plus weeks on a good day to get anything from China to the U.S., through customs, etc.,” said Roger Krulak of modular building company FullStack Modular.
  • Large companies like Apple have already announced a delay in their latest smartphones which would affect their first-quarter sales.

China removes tariffs on North American hardwoods

Tariffs on certain US and Canadian hardwood species will not be imposed for exactly one year starting February 28, according to the announcement of the Chinese government. Woodworking

  • “Work is underway to define exactly what that will mean for these products and what the definite tariff rate will be moving forward,” said a statement from the National Hardwood Lumber Association (NHLA).
  • The list of hardwood species to which the tariffs will no longer apply includes ash, oak, cherry, and other lumber and logs.
  • The announcement from the Chinese government came one month after both the US and China signed a bilateral agreement to end a two-year trade dispute.

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