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As I See It

What are your economic indicators saying?

I don’t know about many of you, but I’ve developed some little recession monitors since 2008, such as the amount of traffic on the street at 6:30 on a weekday morning or how difficult it is to get parking at the train station. The commute is getting a lot more crowded these days.

The trade shows are healthier. We were please to see that the International Builders Show is once again looking vibrant, although it’s still not at pre-recession levels. The show is healthier because housing is coming back.

“Nearly every measure of housing market strength — sales, starts, prices, permits and builder confidence — has been trending upward in recent months and we expect to see gradual but steady growth along these lines in 2013,” said National Association of Home Builders Chief Economist David Crowe.

In particular, Crowe said that house prices are up nearly 6% on an annualized rate over the past 10 months, and that “this has been a trigger for demand to return. People feel comfortable if they buy a house that it will appreciate, not depreciate, in value.”

Other factors that bode well for the housing outlook include low mortgage rates, strong housing affordability, rising household formations and the fact that two-thirds of U.S. housing markets can now be considered improving, according to the NAHB/First American Improving Markets Index.

For the past five quarters, housing has acted as a net contributor to the economy, steadily increasing its share to 12.8% of economic growth in the fourth quarter of 2012.

As we reported in our January issue, Dale Stroud, senior director, marketing and offerings, Uponor Inc., said his firm believes that 2013 will be a better year than 2012 because of macro-economic factors. For example, historically the backlog of unsold homes has hovered at just above 300,000. The backlog is now in the 150,000 range, so, by that measure, supply of available homes is tight.  

NAHB is forecasting 949,000 total housing starts in 2013, up 21.5% from 781,000 units last year.

Single-family starts are anticipated to rise 22% from 535,000 last year to 650,000 in 2013, Crowe said. They are expected to jump an additional 30% in 2014 to 844,000 units.

The commercial market is also looking better. The recent AHR Expo, held in late January in Dallas established four new all-time records for Southwest shows. More than 52,000 attendees (35,000 visitors) filled the aisles of the Dallas Convention Center to see all the latest products and technologies on display from 1,951 exhibiting companies covering 397,000-sq.ft. The previous Southwest records were set by the 2007 AHR Expo that was also held in Dallas.

“We were very pleased with the attendance and the enthusiasm on the show floor,” said Clay Stevens, president of the International Exposition Co. that produces and manages the AHR Expo. “The aisles were packed for almost all three days of the Show.”

Well, I don’t know about all three days, Clay, but there were periods when the aisles were almost impassable. The show also overflowed the available space and several hundred exhibits were located in a lower-level parking garage.

Associated Builders and Contractors Chief Economist Anirban Basu is similarly enthusiastic about the commercial market. Basu, by the way, is a great speaker, so if he’s featured at a contractor convention you’re attending, don’t miss him.

“Nonresidential construction activities in December appear to confirm the notion that the nation remains in recovery, despite news that gross domestic product turned negative during last year’s fourth quarter,” said Basu. “While the pace of nonresidential construction recovery remains moderate, there is little indication that the recovery has stalled altogether.

“It may be tempting for some to attribute recent progress in nonresidential spending to Hurricane Sandy reconstruction, but an analysis of the data suggests the ongoing recovery is significantly broader than these rebuilding efforts,” Basu said.

There are other leading indicators that bode well. Architects’ billings, for example, are reportedly increasing.

We had hoped in December of 2011 that 2012 would be good. It turned out, however, to be tougher than we expected, mostly as a hangover from a 2011 that the data suggests was worse than we thought, even at the time. We believe those struggles are behind us now.

Follow me on Twitter @bobmader

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