Numbers Game

Sep 1, 2007 12:00 PM, By Michael Eby, Editor-in-Chief

Every time I pick up a newspaper, turn on the radio, or tune in to the local or national TV news, all I hear about is how bad the residential housing market is performing. Foreclosures are at an all-time high. Lending institutions and mortgage companies are laying off workers or closing their doors altogether. Homebuilders' stock prices are taking a beating, and inventory levels are on the rise. These media groups sure know how to paint an ugly picture, don't they? The question is, are they justified in their coverage of this important topic? Sure they are. Let's take a look at some numbers.

According to an August 16^th press release issued by the U.S. Census Bureau and the Department of Housing and Urban Development, building permits for privately owned housing units in July were at a seasonally adjusted annual rate of 1,373,000. This is 2.8% below the revised June value of 1,413,000 and 22.6% below the revised July 2006 figure. Privately owned housing starts were at a seasonally adjusted annual rate of 1,381,000. This is 6.1% below the revised June estimate of 1,470,000 and 20.9% below the revised July 2006 rate of 1,746,000. Single-family housing starts in July came in at 1,070,000, which is 7.3% below the June rate of 1,154,000. In addition, a September 4^th construction report issued by the Census Bureau reported an 18% drop in residential construction compared to the same period in 2006.

But for those of us in the electrical construction field, this should come as no surprise. We all knew the residential market was long overdue for a slowdown. In fact, we're lucky the decline didn't begin a year or two earlier. What annoys me most is that the same media groups spreading gloom on the residential housing front gloss over all of the positive news coming out of the construction arena — namely the strength of the nonresidential sector.

According to the same September 4^th Census Bureau report noted above, private nonresidential construction rose 0.4% in July and is up 17% year-to-date. Commercial construction is up too, posting a 15% year-to-date rise. Private office construction is up 22% for the year, and lodging is currently posting a 60% year-to-date increase. In addition, the power sector is up 19% and private health care 13% for the year. On the public side of the street, the education sector is up 12% for the year, helping support an 11% year-to-date improvement in the public construction sector. All-in-all, very strong numbers are being posted for most of the nonresidential markets. So why am I hard pressed to find this being reported in the general news?

This rejuvenation of projects in the nonresidential sector not only bodes well for the general public, but also for EC&M's Top 50 electrical contractors. I don't want to steal any thunder from Staff Writer Beck Ireland, but a review of this year's Top 50 report (starting on page 46) is full of good news and positive vibes. The outlook for the remainder of this year and into 2008 is also optimistic. So, if you're as sick and tired of listening to all those negative housing reports in the press as I am, then give your spirit a lift by reading this month's cover story on how the biggest construction companies in the electrical market are reaping the benefits of a strong nonresidential construction market. And remember, the key to making sure you and your business fall in the “positive number” category is to anticipate these types of shifts in construction activity before they occur, giving you ample time to adapt, adjust, and take action.