Transcript Construction Environment - University of North Florida

Construction Environment
BCN 4772 Summer 2006
Residential 2006
National
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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
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
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Duval County
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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
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
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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
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New Home Construction
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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
What does it mean?
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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?
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
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(fastest growing segment in the industry)
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10% decrease in power construction
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.
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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.
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Construction Costs
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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
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Issues to look at
Apartment market
 Rentals
 Investment Property
 Rising Mortgage rates
 Credit limits
 Baby Boomers
 Global demand for construction materials
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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
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Price Index
Cost of basket today
Cost of basket in base year
X 100
If a light bulb costs .75 now and last year it cost .50 What is PI?
.75
X 100 =
.50
1.5
X 100 = 150
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
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BCI
Cement
BCI
Lumber
Skilled Labor
Steel
22%
2%
13%
63%
CCI
CCI
Cement
Lumber
Common Labor
Steel
12%
1%
s
79%
8%
Other Building Cost Indexes
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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
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Other Building Cost Indexes
Selling Price Indexes-Building
 Valuation Indexes
 Commerce and BLS Cost Indexes
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ENR
Other Trends
Oil prices
 Steel Prices
 Cement Prices
 Wages
 Baby–Boomers
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Good News