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10/30/2014

Regional Housing Sales, Construction Slowing

The Atlanta Fed conducts a monthly poll of regional residential brokers and homebuilders to track emerging trends in housing markets. The latest results, which reflect activity in September 2014, suggest continued slow growth in sales and construction activity.

Many residential brokers and builders indicated that home sales were flat to slightly up from the year-earlier level. The report from brokers and builders on buyer traffic was mixed. Those who indicated a decline in traffic suggested that seasonal factors and a decline in buyer confidence were behind the decline. A growing share of residential brokers and builders reported that home inventory levels had increased slightly from the year-earlier level. Comments suggested that well-priced homes are moving quickly, but that many sellers are pricing their homes fairly optimistically, causing inventory to build until prices are adjusted.

Many builders reported that construction activity had increased from the year-earlier level. The drop depicted in the chart below reflects the fact that a growing share of builders reported construction activity as flat to down slightly.

September 2014 Southeast Construction Activity

Most builders indicated that they continue to experience upward pressure on materials prices. Builders’ reports ranged widely when we asked them to specify the materials experiencing the greatest pricing pressure, and their responses included concrete, drywall/sheetrock, and lumber. These reports are fairly consistent with year-over-year changes in the Engineering News Record’s cost indices: on a year-earlier basis, concrete prices are up 3–4 percent, drywall/sheetrock products are up 10 percent, and lumber products are up 7–9 percent.

Builders also continued to report upward pressure on labor costs and that they are having a tougher time filling positions compared to a year earlier. In addition to asking about builders’ difficulty filling positions, we posed a special question about labor shortages. Two-thirds of builders indicated that they were experiencing a labor shortage. Reports about the trades most affected by these shortages were also fairly wide-ranging, but there seemed to be a fair amount of consensus around the idea that framers, masons, carpenters, and drywall installers were the hardest tradespeople to come by on job sites. These results are fairly consistent with report released by the National Association of Home Builders earlier this year.

To explore these results in more detail, or to view other results that were not discussed in this post, please see our Construction and Real Estate Survey results.

Note: The latest poll results, which reflect activity in September 2014, are based on responses from 40 residential brokers and 25 homebuilders and were collected October 6–15. Please sign up if you would like to participate in this poll.

Photo of Jessica DillBy Jessica Dill, senior economic research analyst in the Atlanta Fed's research department


October 30, 2014 in Construction, Economic conditions, Economic Indicators, Prices, Real Estate, Southeast | Permalink

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10/06/2014

Southeast Housing Shows Slow but Steady Growth

The Atlanta Fed polls its residential broker and home builder business contacts once a month to keep a close pulse on current trends in residential real estate and construction. The latest poll results, which reflect activity in August 2014, suggest that growth continues at a slow and steady pace.

The majority of homebuilder respondents indicated that home sales were flat to slightly up from the year-earlier level (see the chart). The report from residential brokers was somewhat mixed.

August 2014 SE Home Sales v Year Earlier

A look at recent regional home sales statistics from the metropolitan statistical area perspective appears to confirm this portrait (see the table).

Existing Year-over-Year Home Sales Growth, August 2014

The majority of builders indicated that buyer traffic was up from the year-earlier level, and the report from brokers was again mixed. Many brokers and builders reported that home inventory levels remained flat or were down from the year-earlier level. Most contacts continued to note that home prices were up slightly in August compared with year-ago levels.

The majority of builders reported that construction activity had increased from the year-earlier level (see the chart).

Existing Year-over-Year Home Sales Growth, August 2014

The incoming data appear to confirm this report of increasing construction activity. In the chart below, I’ve calculated the year-over-year percent change in U.S. single-family housing starts and separated out the contribution that each Sixth District state made to the total change. The stacked bar farthest to the right represents the August 2014 data point and reveals that the states making up the Sixth District all contributed positively to the 4.2 percent year-over-year increase in single-family starts at the national level.

Note: The latest poll results, which reflect activity in August 2014, are based on responses from 38 residential brokers and 19 homebuilders and were collected September 2–10.

By Jessica Dill, senior economic research analyst in the Atlanta Fed's research department

October 6, 2014 in Real Estate, Southeast | Permalink

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08/27/2014

Southeast Housing Update: Exploring the Recent Slowdown

Following several months of somewhat disappointing reports on home sales and housing starts, we decided that it was time to ask the residential brokers and builders who participate in our monthly housing market poll to revisit the factors that may be contributing to slower-than-hoped-for growth.

When housing’s momentum began slowing in mid-2013, many contacts pointed to rising mortgage rates as the reason. Then in early 2014, many attributed the continued sluggishness to inclement weather. Although it seemed that weather did, in fact, play a role, our business contacts reported that less affordable buying conditions (for example, higher rates and prices) and limited inventory were greater culprits.

So what is the reason now? Our latest poll results suggest that contacts continue to believe that less affordable buying conditions and limited inventory—plus tight credit conditions—are the main factors behind the slowing activity (see the table).

Factors Influencing the Slow Growth of the Housing Market

Although the results of this special question help us as we think through what might be contributing to the weak growth, it is important to acknowledge that the incoming data (and upwardly revised data from the past few months) suggest that housing activity might not actually be slowing to the degree we previously thought. And in fact, a quick look at the latest poll results (without considering the special question) might also lead one to conclude that regional housing market conditions remain fairly positive. To explore the latest results in more detail, please view our Construction and Real Estate Survey results.

Note: The latest poll results reflect activity in July 2014 and are based on responses from 44 residential brokers and 16 homebuilders and were collected August 4–13. If you would like to participate in this poll, please consider signing up.

Photo of Jessica DillBy Jessica Dill, senior economic research analyst in the Atlanta Fed's research department


August 27, 2014 in Economic conditions, Housing, Inventories, Prices, Real Estate, Southeast | Permalink

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08/22/2014

Southeast Commercial Construction Update: Activity Up from Last Year

At the national level, total nonresidential construction spending fell 2.78 percent between May and June but increased 4.6 percent from the year-earlier level. Because nonresidential construction projects tend to take place over longer time horizons, it’s useful to aggregate the data by quarter to smooth out their short-term volatility. Doing so reveals that nonresidential spending increased slightly (just shy of 2 percent) between the first and second quarters of 2014 and that it increased by 6.7 percent from the second quarter in 2013.

Does the Southeast commercial construction picture align with the national one? The Atlanta Fed polls southeastern business contacts engaged in commercial construction each quarter to track and better understand regional trends in construction activity. The latest poll results appear to echo the national story, suggesting that a pickup in commercial construction activity was sustained through the second quarter of 2014.

Most respondents indicated that the pace of nonresidential construction activity in the Southeast was either ahead of the year-earlier level or remained unchanged from the year-earlier level. All contacts reported that the pace of multifamily construction had increased from year-earlier levels (see the charts).

Pace of Nonresidential Construction Activity versus a Year Ago Pace of Multifamily Construction Activity (units) versus a Year Ago

Several comments from respondents help to illustrate these trends:

  • “More projects to go after in all markets, but competition is still very intense.”
  • “Multifamily supply continues to grow at a strong pace.”
  • “For the first time in six years we are beginning to see much larger projects in the healthcare, commercial and industrial markets.”
  • “Apartment construction remains at a high level and brings concerns that the market will become overbuilt. Each month it seems there are more announcements for new apartment projects.”

Half of all respondents reported that backlog was greater than the year-earlier level; the other half indicated that backlog was similar to the year-earlier level. Although this response represents a drop from the last two quarterly measures of 89 percent and 76 percent, it is still an indication that the pipeline of future activity remains fairly robust.

The number of respondents reporting that the amount of available credit met or exceeded demand continued to increase from earlier reports. Sixty-eight percent of contacts in the second quarter 2014 indicated that credit was sufficient, compared with 60 percent the previous quarter and 57 percent one year earlier (see the chart).

How available do you perceive commercial construction finance to be in your market?

The majority of contacts reported that they plan to increase hiring during the next quarter. Seventy-five percent of contacts in the second quarter 2014 reported that they were planning to do modest to significant hiring, slightly down from 79 percent the previous quarter but up from 57 percent one year earlier (see the chart).

Hiring Plans for Next Quarter versus This Quarter

Compared with a year earlier, more contacts (roughly one out of three) indicated that they were having a difficult time filling positions (see the chart).

Difficulty Filling Positions versus a Year Ago

All contacts reported some degree of upward pressure on labor costs. Sixty percent of contacts indicated that their labor costs had increased more than 3 percent from year-earlier levels. A growing share reported labor cost increases of 6 percent or more (see the chart).

Labor Costs versus a Year Ago

The next poll will open on October 6, 2014. If you are a commercial contractor and would like to participate in this poll, please let us know by sending a note to RealEstateCenter@atl.frb.org.

Note: Second quarter 2014 poll results were collected July 7–16, 2014 and are based on responses from 20 business contacts. Participants of this poll included general contractors, subcontractors, lenders, developers, and material fabricators with footprints of varying sizes across the Southeast.

Photo of Jessica DillBy Jessica Dill, senior economic research analyst in the Atlanta Fed's research department


August 22, 2014 in Construction, Economic conditions, Economic Indicators, Employment, Labor Markets, Real Estate, Southeast | Permalink

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08/01/2014

Southeast Housing Update: Building on Recent Gains

To detect emerging real estate trends, the Atlanta Fed conducts a monthly poll of southeastern broker and builder business contacts. The latest poll results suggest that housing market conditions in the Southeast remain positive.

The majority of brokers (60 percent) and builders (63 percent) indicated that home sales had increased from the year-earlier level (see the chart):

SE Home Sales versus a Year Earlier

The home sales outlook among contacts remained fairly upbeat. More than 80 percent of brokers and just under 50 percent of builders expect to see continued growth in home sales (see the chart):

SE Homesales Outlook versus a Year Earlier

More than half of the brokers and close to three-fourths of the builders reported that buyer traffic was up from the year-earlier level (see the chart):

SE Buyer Traffic versus a Year Earlier

Most brokers and builders reported that home inventory levels remained flat or were down from the year-earlier level (see the chart):

SE Home Inventory versus a Year Earlier

The majority of brokers and builders reported that home prices were up in June compared with year-ago levels (see the chart):

SE Home Prices versus a Year Earlier

More than three-fourths of builders reported that construction activity had increased from the year-earlier level (see the chart):

SE Construction Activity versus a Year Earlier

To explore these results in more detail, please visit our Construction and Real Estate Survey page.

Note: The latest poll results are based on responses from 40 residential brokers and 19 homebuilders and were collected July 7–16, 2014. Please sign up if you would like to participate in this poll.

August 1, 2014 in Housing, Real Estate, Southeast | Permalink

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07/07/2014

To Buy or Not to Buy, That Is the Question (for Millennials)

In the last month, the South Florida Business Journal reported on the announcement of at least three new apartment projects:

  • June 18: Developers plan 300 apartments in Midtown Miami
  • June 19: Lennar plans 229 apartments in Boca Raton after $7.5M purchase
  • June 23: Broward commissioners to vote on 400-apartment project

Data from the real estate analytics firm REIS indicate that 2,425 new apartment units were completed in Miami in 2013. Not only is this noteworthy because this represents the most units delivered per year since 1991 but also because nearly all of the units were absorbed. More than 600 units have been delivered so far in 2014, and close to 3,000 units remain under construction. Despite this comeback in Miami apartment construction, the apartment vacancy rate ended the first quarter at 3.8 percent and is expected to remain at this low level for an extended period. Is apartment construction heating up in South Florida as a result of a change in fundamental beliefs of the rising generation?

According to an article featured in the latest issue of the Atlanta Fed's EconSouth, the generation known as the millennials is showing signs of veering from established patterns, particularly when it comes to milestones like moving out of the parents' house, getting married, and buying a home. Many experts, including Atlanta Fed economist Tim Dunne (who has written extensively on the topic, including this article), acknowledge that economic conditions are partly to blame for these delayed decisions.

But are these decisions only being delayed, or have preferences changed? Reports from some Atlanta Fed business contacts suggest that attitudes and preferences may in fact be changing. Some business contacts report that, unlike previous generations, millennial employees are often unwilling to commit long term to one organization, preferring instead nonmonetary perks such as flex time over higher pay, and they place great value on work-life balance. Moreover, real estate business contacts in South Florida have noted that millennials prefer the "experience" that often comes with high-end apartments, such as amenities including dining and shopping, rather than a traditional home in a suburban setting.

More than shifting preferences may be at work, though. According to Fannie Mae’s national housing survey, conducted in May 2014, potential first-time homebuyers are facing several challenges that inhibit their ability to purchase a home. Although the survey does confirm that the number of renters has increased on a national basis, and the number of homeowners has declined, since the financial crisis, the survey's findings indicate that potential homebuyers are not renting by choice but rather by necessity. Higher credit standards and increasing home prices have hindered potential homebuyers. The survey results suggest that younger renters aspire to own but feel pessimistic about their ability to get a mortgage, perceiving down payment and credit score requirements as obstacles. The survey also reported that young renters aspire to own for financial and lifestyle reasons, although a smaller share of respondents (versus last year) reported that their primary reason for renting is to prepare them for homeownership.

For the rental market, the question remains whether that segment's growth is a permanent shift by millennials or merely a bridge until this generation is better prepared to become homeowners.

By Marycela Diaz-Unzalu, a Regional Economic Information Network analyst in the Atlanta Fed's Miami Branch

July 7, 2014 in Florida, Housing, Real Estate | Permalink

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07/01/2014

Southeast Housing Update: Home Prices Increasing, If Only Slightly

To detect emerging real estate trends prior to the release of the official statistics, the Atlanta Fed conducts a monthly poll of Southeast broker and builder business contacts. The latest poll results came in a few weeks ago and revealed the following:

  • More builders, but fewer brokers, indicated that home sales had increased from the year-earlier level. Contacts were much less optimistic about future sales growth than they were a year earlier.
  • Fewer brokers, but more builders, noted that inventory levels were down from the year-earlier level.
  • Most brokers and builders continued to report that home prices increased slightly in May compared to year-ago levels.
  • Fewer builders reported an increase in construction activity from month-earlier and year-earlier reports, but their outlooks remained optimistic and largely unchanged from the year-earlier level.

To view the latest poll results in more detail, please visit the Atlanta Fed's Construction and Real Estate Survey page.

Thoughts on credit availability
After more than a year of periodically posing questions about mortgage and construction and development finance, we decided to include the credit questions on a monthly basis starting in January 2014. In the latest poll, roughly two-thirds of brokers and builders reported that the amount of available mortgage finance was either equal to or greater than the amount of demand this month (see the charts).

Housing_update

Most builders, on the other hand, continued to report that the amount of available construction and development finance fell short of demand (see the chart). Because we didn't start asking this question until 2012 (and, again, at that point only intermittently), it is hard to say how this perception compares to how conditions were viewed before the housing downturn.

Builders

In an attempt to put things in perspective, we posed a special question in June to builders asking them how the availability of construction and development finance now compares with the availability four, six, eight, and 10 years ago. Most builders reported that construction and development finance is more available now than it was four years ago in 2010. The results for 2008 were somewhat mixed. Builders were almost unanimous in reporting that construction and development finance is less available now than it was in 2004 and 2006 (see the chart).

Availability_construction

Note: The latest poll results are based on responses from 38 residential brokers and 19 homebuilders and were collected June 2–11, 2014. If you would like to participate in this poll, please sign up.

Photo of Jessica DillBy Jessica Dill, senior economic research analyst in the Atlanta Fed's research department

July 1, 2014 in Housing, Real Estate, Southeast | Permalink

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06/25/2014

The Growing Gulf Coast: Good Signs despite Low Sales

The weather is not the only thing about to heat up along the Gulf Coast. The economy is warming up as well, according to the Regional Economic Information Network’s (REIN) contacts. The REIN team in the Atlanta Fed’s New Orleans Branch reaches out to leaders from large and small businesses from all sectors of the economy and to representatives from community groups along the Gulf Coast in order to gain a representative picture of regional economic conditions, which, by the way, appears to be markedly improving. Since mid-April, we’ve held 15 one-on-one interviews, one roundtable with a mix of business leaders, our branch board meeting, and we also attended several conferences.

According to our contacts, business sentiment has picked up. Most of them were optimistic about near-term (three to six months) and medium-term (two to three years) growth and were more confident in their outlook than in the recent past. Of contacts who indicated they were experiencing second quarter growth, approximately half believed the growth was a rebound from an unusually weak first quarter, with the other half attributing it to a modest increase in economic strength.

Burgeoning capital investment was a consistent recent theme. A lack of “visibility”—or a firm’s ability to confidently predict future business conditions—was not reported as a significant inhibitor of capital investment. Nearly every contact shared information about merger and acquisition (M&A) activity or capital expenditure projects under way or planned for 2014. Most projects involved expansion to meet growing demand, including constructing new facilities and upgrading existing ones, although several projects involved new product offerings. Consistent with the recent trend along the Gulf Coast, much of the increased investment stemmed from the energy sector. However, we noticed investment picked up in other industries, such as in education and medical services.

Business contacts also reported that spending on consulting services for leadership development and organizational culture training increased. The addition of new leaders, M&A activity that resulted in conflicting organizational cultures, and the recession-era deferral of discretionary spending generated a surge in demand for these services.

Residential real estate across the Gulf Coast picked up marginally since mid-April. The median residential home sale was around $200,000, though inventories were low. Homes in coastal Alabama’s high-end market (over $600,000) were slow to move, and a lack of high-end inventory in coastal Mississippi led to increased construction in that market. In past months, we heard reports of an increase in raw land deals along the Florida Panhandle, and similarly, a recent reemergence of raw land deals was reported in coastal Alabama, often 50 percent bank-financed with fully collateralized loans. Commercial construction also resurfaced in parts of the region.

Resting retail
Unfortunately, the general optimism was not shared by all sectors. Regional retail contacts shared dampened expectations for the second quarter. Some admitted to difficulty adjusting to a shopping landscape increasingly dominated by the internet, which forced big-box retail stores to rethink sales strategies and reevaluate store locations and sizes and in some cases led to resurgence in the redevelopment of shopping centers.

Bracing for the boom
The employment picture was heartening, with nearly all of our contacts implementing hiring plans. In fact, a few contacts who took steps to reduce employment to “lean and mean” levels during the recession and early recovery admitted they were not so sure the decision was advantageous, and recently they saw productivity increase significantly once they added workers. However, the continued shortage of skilled labor has many contacts worried that some project start dates may be pushed back as they struggle to find qualified people.

Most contacts continued to report isolated wage pressures for skilled labor, medical services, and professional jobs, though some expressed they are bracing themselves for significant wage pressure in the coming months as the economy picks up.

The chatter about plans to increase prices in recent months materialized into reports of price increases, yet contacts admitted the increases were challenging and required a great deal of negotiating.

Overall, the Gulf Coast economy appears to be rising out of the recessionary fog and shedding the winter frost. The picture across most industries was definitively positive, with reports of large investment projects, hiring plans, and price increases.

By Adrienne Slack, vice president and regional executive; Rebekah Durham, economic policy analysis specialist; and Harrison Grieb, economic intern, Regional Economic Information Network, all in the New Orleans Branch of the Atlanta Fed


June 25, 2014 in Construction, Economic conditions, Economic Indicators, Employment, Gulf Coast, Prices, Real Estate, Retail | Permalink

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06/20/2014

Southeast Commercial Construction Picks Up the Pace

Each quarter, the Atlanta Fed conducts a poll of Southeast business contacts engaged in commercial construction in an effort to keep a close eye on construction activity. The latest results revealed that the positive momentum noted in the previous quarter was sustained through the first quarter of 2014.

The majority of commercial construction business contacts indicated that the pace of nonresidential construction activity (measured by square feet) and the pace of multifamily construction (measured by number of units) had increased from year-earlier levels (see the charts).

Associated Builders and Contractors Inc., a national construction industry trade organization, conducts a survey of its own called the Construction Backlog Indicator, or CBI. The survey measures the amount of work that will be performed by commercial and industrial contractors in the months ahead. While CBI data are only available through the fourth quarter of 2013, it seems to be telling a similar story to the one our contacts are telling: that the pipeline of construction activity is building up.

The number of respondents reporting that the amount of available credit met or exceeded demand increased from earlier reports (see the chart). Sixty percent of contacts in the first quarter of 2014 indicated that credit was sufficient to meet demand, compared with 58 percent the previous quarter and only 31 percent one year earlier.

Most contacts indicated that they plan to increase hiring during the next quarter (see the chart). Seventy-nine percent of contacts in the first quarter of 2014 reported that they were planning to undertake modest to significant hiring, compared with 58 percent the previous quarter and 64 percent one year earlier.

Compared with one year earlier, more contacts (nearly three out of four) indicated that they were having a difficult time filling positions (see the chart).

This result is also consistent with reports from national trade organizations. In an April 4 press release, the Associated General Contractors of America warned that “the pool of available workers is declining rapidly, raising the prospects for significant labor shortages if demand continues to expand.”

Summarizing the information
The key first quarter 2014 findings show that commercial construction activity was increasing, the level of backlog was growing, that the amount of available credit met or exceeded demand, and that firms plan to hire additional employees during the next quarter. While it was a fairly positive report on the whole, the one finding that could prove problematic was that contacts were having a difficult time filling positions.

Note: First quarter 2014 poll results were collected April 7–16, 2014, and are based on responses from 20 business contacts. Participants of this poll included general contractors, subcontractors, lenders, developers, and material fabricators with footprints of varying sizes across the Southeast. If you are a commercial contractor and would like to participate in this poll, please let us know by sending a note to RealEstateCenter@atl.frb.org.

Photo of Jessica DillBy Jessica Dill, senior economic research analyst in the Atlanta Fed's research department

June 20, 2014 in Construction, Housing, Real Estate | Permalink

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05/30/2014

Southeast Housing Update: Sales, Prices, Construction Activity Spring Forward

The Atlanta Fed conducts a monthly poll of Southeast broker and builder business contacts in an effort to detect emerging real estate trends prior to the release of official government and other statistics. According to the April 2014 Southeast Housing Market Poll results:

  • There was a rebound in the number of brokers and builders reporting that home sales had increased from the year-earlier level.
  • More brokers but fewer builders noted that buyer traffic had increased from a year earlier.
  • Most brokers continued to indicate that inventory levels were down from the year-earlier level. The report from builders was split down the middle—half of respondents said that new home inventories increased from the year-earlier level, the other half noted new home inventory levels had fallen.
  • The vast majority of brokers and builders continued to report that home prices increased from a year earlier.
  • There was a rebound in the number of builders reporting that construction activity had increased from the year-earlier level.

To explore the latest poll results in more detail, please visit our Construction and Real Estate Survey results.

Note: April poll results are based on responses from 35 residential brokers and 26 homebuilders and were collected May 5–14, 2014. The housing poll's diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. Positive values in the index indicate increased activity; negative values indicate decreased activity.

If you would like to participate in this poll, you may sign up here.

Photo of Jessica DillBy Jessica Dill, senior economic research analyst in the Atlanta Fed's research department


May 30, 2014 in Construction, Housing, Prices, Real Estate, Southeast | Permalink

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