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Construction Environment

Construction Environment. BCN 4772 Summer 2006. Residential 2006 National. Median price $210,500 13.1 % Increase from January 2005 Median home price in California in January $551,300 The median home price in New York in January $319,000 Maryland’s median home price in January $290,776

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Construction Environment

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  1. Construction Environment BCN 4772 Summer 2006

  2. Residential 2006 National • Median price $210,500 • 13.1 % Increase from January 2005 • Median home price in California in January $551,300 • The median home price in New York in January $319,000 • Maryland’s median home price in January $290,776 • North Carolina the median home price in January $206,788

  3. Existing Homes Florida • The median value for a home in Florida in 2001 was $118,200 • $244,200 in February 2006 • 106% increase in the last five years • Miami median home price increased from $309,800 to $368,700 in 2006 • Ft. Lauderdale median home price from $319,400 in 2005 to $360,800 in 2006

  4. Duval County • Affordability index = cost of the home / annual family income (J.C.C.I.) • Median household income in Jacksonville is $60,287 • Median home price in Jacksonville is 190,700 • Median house price / Median household income = 3.16 • Target is 2.5 for affordability

  5. Duval County • Increase of 6% in real-estate transactions in Jacksonville over the last 15 years • Increased 8% from 2004 to 2005 • Decrease of 1% in existing home sales in February of 2006 Vs February 2005 • Starting to show a slowing trend

  6. Trends Facing Jacksonville Market • Mortgage Rates have increased from 5.67% to 6.5% from 2005 to 2006 • Large amount of investment houses that have been bought over the last few years • Large supply of condos in the Jacksonville market • Sales of existing homes have decreased all over Florida

  7. New Home Construction • Construction and development lending grew 66 percent during 2005. • Most of the lending is for residential homes and condos • The housing market accounted for 56% of all construction last year. • Sales of new single-family homes rose 13.8 percent last month. • There was a 10.9 percent plunge in sales in February

  8. What does it mean? • Many home purchasers have been stretching to buy their homes. • Adjustable-rate mortgages (ARMs) to reduce their payments.. • ARM’s see mortgage payments increase substantially as interest rates increase. • Foreclosure rates will go up, and home values could be hurt as a result. • Real-estate bubble? • Correction? • Real-estate Boom?

  9. Commercial Construction • 8.6% increase in commercial market to 67 billion • 6.2% increase in office building market to 35 billion • 6.7% increase in health care work • 22% gain in industrial construction (fastest growing segment in the industry) • 10% decrease in power construction

  10. Commercial Construction • Commercial construction spending is at record levels • The biggest categories were projects for use as office space • Hotel market has seen a rebound in new construction as well • Steep rises in both demand and construction costs are fueling the growth.

  11. Construction Costs • Prices for iron and steel products rose 35% in 2004 • Steel rebar and copper wire skyrocketed by as much as 60% in some markets • PVC pipe and other petroleum-derived materials went up between 15% and 20% • Steel and cement prices have been especially high as well.

  12. Construction Costs • If Costs keep going up, why is there a large growth trend in the construction industry? • Rate of growth of real-estate • Demand • Speculation • State of the economy • Hurricanes

  13. Issues to look at • Apartment market • Rentals • Investment Property • Rising Mortgage rates • Credit limits • Baby Boomers • Global demand for construction materials

  14. Price Index • What is a price index? • The cost of a basket of goods expressed as a percentage of the cost of the same basket of goods during a base year. • CPI, PPI, GDP Deflator • BCI, CCI

  15. Cost of basket today X 100 Cost of basket in base year .75 150 1.5 X 100 = X 100 .50 Price Index If a light bulb costs .75 now and last year it cost .50 What is PI? =

  16. What does the PI number mean? • If the index for a light bulb is 150 • So in one year the price of a light bulb has gone up by I and 1/2 times or 50% increase • So 1.5 X .50 = .75 • Base year is always 100 • 100/100 = 1

  17. BCI

  18. BCI

  19. CCI

  20. CCI

  21. Other Building Cost Indexes • General-purpose Cost Indexes • ENR 20-City Construction Cost • ENR 20-City Building Cost • BuRec: General Buildings • Factory Mutual: Industrial • Lee Saylor Inc.: Material/Labor • Means: Construction Costs • Smith Group

  22. Other Building Cost Indexes • Selling Price Indexes-Building • Valuation Indexes • Commerce and BLS Cost Indexes

  23. ENR

  24. Other Trends • Oil prices • Steel Prices • Cement Prices • Wages • Baby–Boomers

  25. Good News

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