Construction Environment BCN 4772 Summer 2006
Residential 2006 National l l l Median price $210, 500 13. 1 % Increase from January 2005 Median home price in California in January $551, 300 The median home price in New York in January $319, 000 Maryland’s median home price in January $290, 776 North Carolina the median home price in January $206, 788
Existing Homes Florida The median value for a home in Florida in 2001 was $118, 200 l $244, 200 in February 2006 l 106% increase in the last five years l Miami median home price increased from $309, 800 to $368, 700 in 2006 l Ft. Lauderdale median home price from $319, 400 in 2005 to $360, 800 in 2006 l
Duval County l l l Affordability index = cost of the home / annual family income (J. C. C. I. ) Median household income in Jacksonville is $60, 287 Median home price in Jacksonville is 190, 700 Median house price / Median household income = 3. 16 Target is 2. 5 for affordability
Duval County Increase of 6% in real-estate transactions in Jacksonville over the last 15 years l Increased 8% from 2004 to 2005 l Decrease of 1% in existing home sales in February of 2006 Vs February 2005 l Starting to show a slowing trend l
Trends Facing Jacksonville Market Mortgage Rates have increased from 5. 67% to 6. 5% from 2005 to 2006 l Large amount of investment houses that have been bought over the last few years l Large supply of condos in the Jacksonville market l Sales of existing homes have decreased all over Florida l
New Home Construction l l l Construction and development lending grew 66 percent during 2005. Most of the lending is for residential homes and condos The housing market accounted for 56% of all construction last year. Sales of new single-family homes rose 13. 8 percent last month. There was a 10. 9 percent plunge in sales in February
What does it mean? l l l l Many home purchasers have been stretching to buy their homes. Adjustable-rate mortgages (ARMs) to reduce their payments. . ARM’s see mortgage payments increase substantially as interest rates increase. Foreclosure rates will go up, and home values could be hurt as a result. Real-estate bubble? Correction? Real-estate Boom?
Commercial Construction 8. 6% increase in commercial market to 67 billion l 6. 2% increase in office building market to 35 billion l 6. 7% increase in health care work l 22% gain in industrial construction l (fastest growing segment in the industry) l 10% decrease in power construction
Commercial Construction Commercial construction spending is at record levels l The biggest categories were projects for use as office space l Hotel market has seen a rebound in new construction as well l Steep rises in both demand construction costs are fueling the growth. l
Construction Costs Prices for iron and steel products rose 35% in 2004 l Steel rebar and copper wire skyrocketed by as much as 60% in some markets l PVC pipe and other petroleum-derived materials went up between 15% and 20% l Steel and cement prices have been especially high as well. l
Construction Costs l If Costs keep going up, why is there a large growth trend in the construction industry? l Rate of growth of real-estate l Demand l Speculation l State of the economy l Hurricanes
Issues to look at Apartment market l Rentals l Investment Property l Rising Mortgage rates l Credit limits l Baby Boomers l Global demand for construction materials l
Price Index What is a price index? l The cost of a basket of goods expressed as a percentage of the cost of the same basket of goods during a base year. l CPI, PPI, GDP Deflator l BCI, CCI l
Price Index Cost of basket today Cost of basket in base year X 100 If a light bulb costs. 75 now and last year it cost. 50 What is PI? . 75. 50 1. 5 X 100 = 150
What does the PI number mean? If the index for a light bulb is 150 l So in one year the price of a light bulb has gone up by I and 1/2 times or 50% increase l So 1. 5 X. 50 =. 75 l Base year is always 100 l 100/100 = 1 l
BCI
BCI
CCI
CCI
Other Building Cost Indexes l General-purpose Cost Indexes l ENR 20 -City Construction Cost l ENR 20 -City Building Cost l Bu. Rec: General Buildings l Factory Mutual: Industrial l Lee Saylor Inc. : Material/Labor l Means: Construction Costs l Smith Group
Other Building Cost Indexes Selling Price Indexes-Building l Valuation Indexes l Commerce and BLS Cost Indexes l
ENR
Other Trends Oil prices l Steel Prices l Cement Prices l Wages l Baby–Boomers l
Good News
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