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Housing Decline Sparks Slowdown In Construction (registration)
October 27, 2006 (ALEX FRANGOS - Wall Street Journal)
Store, Mall Demand Drops As Fewer Homes Are Built; Weighing Economic Risks
The unexpectedly rapid decline of the nation's housing market will mean an overall drop in construction spending next year, with spillover effects in areas such as job growth and real-estate development.
In a closely watched report expected to be released today, McGraw-Hill Construction will forecast the first decline in overall construction spending since 1991. The company says the value of new construction will decline 1% in 2007 to $668 billion, compared with an expected rise of 1% for 2006 and a 12% increase in 2005. McGraw-Hill said the anticipated decline was due mostly to a 5% fall in construction of single-family homes. But the overall drop also reflects a 3% slide in construction of stores and shopping centers, a component closely tied to population growth and home-building trends.
"Single-family housing has fallen more steeply than what we had anticipated and the correction is taking place faster," says Robert Murray, vice president at McGraw-Hill Construction, a unit of McGraw-Hill Cos. The industry "no longer has single-family housing to bolster total construction."
AntiSpin: Another "more steeply than what we had anticipated and the correction is taking place faster" report, as I mentioned yesterday. Expect more of the "unexpected."
One statistic we've been tracking is that retail space has increased at more or less the same rate as population growth until 1995 when it began to grow at a much faster pace.
According to Sprawl-Busters, the US has 20 square feet of retail space for every man, woman and child in America, up from 14.7 s.f. per person in 1986. At the same time, sales via the Internet have grown from zero to 2.2% of all retail sales, but continues to grow by around 20% per year. "The most recent Census Bureau data for the nation on e-commerce comes from the Monthly Retail Trade Survey and is for the third quarter of 2005. Going into the holiday season, there were $962.7 billion in retail sales, and e-commerce sales comprised 2.2 percent of total sales."
Reasonable to expect that in the coming recession, in-store sales will be hit disproportionately relative to eCommerce sales, which tend to offer better discounts and convenience to consumers with more money to spend. Expect a rapid decrease in retail construction and for residential construction to decline in line with the ten to 15 year correction outlined here.
October 27, 2006 (ALEX FRANGOS - Wall Street Journal)
Store, Mall Demand Drops As Fewer Homes Are Built; Weighing Economic Risks
The unexpectedly rapid decline of the nation's housing market will mean an overall drop in construction spending next year, with spillover effects in areas such as job growth and real-estate development.
In a closely watched report expected to be released today, McGraw-Hill Construction will forecast the first decline in overall construction spending since 1991. The company says the value of new construction will decline 1% in 2007 to $668 billion, compared with an expected rise of 1% for 2006 and a 12% increase in 2005. McGraw-Hill said the anticipated decline was due mostly to a 5% fall in construction of single-family homes. But the overall drop also reflects a 3% slide in construction of stores and shopping centers, a component closely tied to population growth and home-building trends.
"Single-family housing has fallen more steeply than what we had anticipated and the correction is taking place faster," says Robert Murray, vice president at McGraw-Hill Construction, a unit of McGraw-Hill Cos. The industry "no longer has single-family housing to bolster total construction."
AntiSpin: Another "more steeply than what we had anticipated and the correction is taking place faster" report, as I mentioned yesterday. Expect more of the "unexpected."
One statistic we've been tracking is that retail space has increased at more or less the same rate as population growth until 1995 when it began to grow at a much faster pace.
According to Sprawl-Busters, the US has 20 square feet of retail space for every man, woman and child in America, up from 14.7 s.f. per person in 1986. At the same time, sales via the Internet have grown from zero to 2.2% of all retail sales, but continues to grow by around 20% per year. "The most recent Census Bureau data for the nation on e-commerce comes from the Monthly Retail Trade Survey and is for the third quarter of 2005. Going into the holiday season, there were $962.7 billion in retail sales, and e-commerce sales comprised 2.2 percent of total sales."
Reasonable to expect that in the coming recession, in-store sales will be hit disproportionately relative to eCommerce sales, which tend to offer better discounts and convenience to consumers with more money to spend. Expect a rapid decrease in retail construction and for residential construction to decline in line with the ten to 15 year correction outlined here.
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