July Wrap-Up Construction Insider: Home construction increase, builder confidence recovery & more

July Wrap-Up Construction Insider: Home construction increase, builder confidence recovery & more

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

Home construction rises 17.3% in June

Residential construction in the United States jumped by 17.3% in June following a moderate recovery in May and steep declines in April and March. CNBC

  • The seasonally adjusted rate of new homes in June was 1,186,000, according to the data from the Commerce Department.
  • The slight improvement in residential construction happened as some states reopened after the pandemic-related closures, but the numbers still lagged compared to last year’s values.
  • Application for building permits also rose by 2.1% to 1.24 million units. An increase in building permit applications is a good indication of further improvement in construction activity.

Builder confidence signals post-pandemic recovery

Builder confidence reached 72 points in July, a 14-point jump from previous months’ values as the current Housing Market Index (HMI) levels with pre-pandemic values. NAHB

  • The increase in builder confidence is due to the strong interest in new construction and renewed demand after the lockdowns in spring, said NAHB Chairman Chuck Fowke.
  • However, challenges still exist despite the recent economic rebound. “Lumber prices are at a two-year high and builders are reporting rising costs for other building materials,” according to NAHB Chief Economist Robert Dietz.
  • Aside from builder confidence, other indices based on the NAHB survey also increased in July, including sales conditions, which rose from 16 to 79 points, and sales expectations, which jumped from 68 to 75 points.

Contractor confidence, construction backlog jump up in June

Construction Backlog Indicator increased by 0.2 months to 8.1 months in June, while Construction Confidence Index (CCI) values for various indicators also improved, based on reports from the Associated Builders and Contractors (ABC). AZ Big Media

  • All regions except for the Middle States recorded an increase in backlog in June, which, according to ABC chief economist Anirban Basu, may be an indicator of hidden weaknesses.
  • Contractors have reported that many projects are still placed on hold. “Some of this may be due to public health or jobsite-specific concerns, but tighter financial conditions also play a role,” said Basu.
  • However, CCI values for sales expectations increased from 44.9 to 51.1 in June, while CCI for staffing levels jumped from 53 to 56.
  • Profit margin outlooks also improved to 47 from 41.7, although the below-50 value still indicated expectations of contraction within the next 6 months.

Trump issues new ruling to limit NEPA scope, speed up permit process

US President Donald Trump announced a final ruling on July 15 limiting the scope of the National Environmental Policy Act (NEPA) and shortening review timelines for infrastructure permit applications. FCP

  • The NEPA requires federal agencies to consider environmental factors when approving infrastructure projects, but the new ruling limits the type and number of projects to be covered by this law.
  • The final NEPA ruling also drops the requirement for agencies to consider the cumulative environmental impacts of a project.
  • Environmental impact statements must be issued within a two-year limit, according to the new regulations.
  • “The modernization of these critical regulations will go a long way toward eliminating unnecessary delays that cause budget overruns in construction,” said ABC Vice President of Legislative & Political Affairs Kristen Swearingen.

Construction material costs continue to soar amid pandemic

The cost of raw materials rose by 2.2 percent in June and non-residential material prices also increased by 2.3 percent, according to the Associated Builders and Contractors (ABC). The Architect’s Newspaper

  • The increase in material prices was recorded as the global supply chain continued to struggle against pandemic-related disruptions and international tensions.
  • The “lack of demand” for construction services due to the COVID-19 outbreak still emerged as the primary source of concern among contractors, said ABC chief economist Anirban Basu.
  • Overall, material costs still remain lower by 3.4 percent compared to the rates reported in June 2019.

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