Construction Lagging General Economic Upturn

Atlanta, GA, May 6, 2010--The construction sector has lagged in the general economic recovery, according to Kermit Baker, chief economist for the American Institute of Architects.

Baker was speaking at a webinar organized by Reed Construction Data, the Associated General Contractors of America and the AIA. Baker provided perspective on trends in the housing market and also some of what architects are saying about conditions in the non-residential market.

“Housing is one sector that has posted disappointing results so far in its recovery. It hit bottom over a year ago, but the key housing indicators (housing starts, new and existing home sales, etc.) have seen only modest gains to date and even though house prices are stable, or even slightly increasing, they have fallen more than we’ve seen in any recession over the past 75 years,” said Baker, who explained that prior to this down turn housing prices had never fallen during an entire calendar year on a national basis.

“Housing prices fell almost 30 percent, but all major indices of housing prices show them stabilizing if not recovering,” he said. “On the other hand, there are still some markets that could see further declines, but that’s a lower and lower number.”

“Typically we see housing activity improve 20-30 percent in the first year of a recovery; this time new and existing home sales are up less than 10 percent and housing starts are up less than 20 percent,” he said. “To get those numbers we needed a strong performance in March; prior to March they were running below that.”

Baker noted that both the commercial and industrial sectors, as well as institutional sector, have leveled off and “we have not seen much in terms of promising signs in recent months and they don’t seem like they are ready to turn around,” says Baker.

Baker says commercial property values are suffering from steep declines in value, which could have a major impact on refinancing.

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