Editorial - Pool.mo.it

12
CER MAGAZINE INTERNATIONAL N.17 Spring/Summer 2006
Market
Growth in US building industry
continues in spite of higher
interest rates.
by Donald Deangelis
The 2005 was an extraordinary
year for the US real property market,
marking the culmination of a
period of steady expansion that
began in 2000. This growth was
driven by numerous factors,
including population growth, economic
stability and, most of all,
low interest rates. Large numbers
of families have taken advantage of
the favourable situation to remodel
their homes or to buy properties,
thereby pushing up prices throughout
the country, most significantly
in New York and California. This in
turn has encouraged speculation
and further invigorated the market.
According to all the analysts, the
slowdown that began in the last
four months of 2005 marks a natural
return to normality after a fiveyear
period characterised by
extremely rapid growth in both volume
and prices.
In 2005 construction expenditure
in the United States exceeded
$1,146 billion, 7.8% more than the
$1,063 billion in the previous year.
The private construction accounted
for $892 billion, a 7.8% increase
over 2004 and public construction
rose to $254 billion.
The seg-
ment that has
done most to
drive building
growth is private
residential,
which comprises
54% of the US
building market
at $642 billion
(9.7% increase
from 2004).
Construction of
new single-family
houses was
the largest and
most dynamic
segment of the real estate market,
with a total of 1,245,000 units sold
in 2005, an increase of 6% from
the previous year. Growth was
higher in the southern states
(10.1%) and in the Northeast
(9.4%), while levels of construction
Effective mortgage rate and the ten-year treasury yeld
In 2005 construction
expenditure
in the United
States exceeded $
1,146 billion,
7,8% more than
the $ 1,063 billion
in the previous
year
remained stable in the other
regions: +0,6% in the West and no
change in the Mid-West. There
were 1,577,000
single-family
housing starts in
2005, which
when added to
the figure for
multi-family
housing makes a
total number of
housing starts of
2,064,000units.
This included
about a million
in the South,
half a million in
the West,
350,000 in the
Mid-West and
200,000 in the North-East, with
total growth of 5.6% compared to
the 1,955,000 of 2004.
Although 2005 was a positive year
for residential building and for the
construction industry in general,
the last four months of the year
showed clear signs of a slowdown.
In November, new house purchases
dropped by 11.3% and the average
price of a house fell to
$216,000 compared to $225,000
in October (-4.1%). The drop in
demand for new housing was particularly
evident in the West, where
the largest fall in the past ten years
was recorded in November, -22.1%.
There was a decrease of 18.3% in
the Midwest and 5.5% in the South,
whereas the Northeast showed
13.4% growth.
There are a number of factors
behind this trend, including the
increase in interest rates by the
Federal Reserve Bank; the rise in
home building costs, partly due to
higher fuel costs; the higher cost of