The annual pace of construction has slowed for the 13th consecutive month in April, falling 2 percent from a year ago to a seasonally adjusted annual rate of $1.19 trillion, according to a recent report from the U.S. Census Bureau. Construction spending totaled $345.1 billion during the first four months of 2007, down 2.5 percent from construction spending during the same period in 2006. The annual pace of total construction spending has remained above $1 trillion since July 2004.
Spending on residential construction in April 2007 decreased 14.1 percent from the previous year to a rate of $573.1 billion. The value of nonresidential construction activity in April rose 12.7 percent to a rate of $616.9 billion, according to the report.
Commercial real estate is hot in Europe as the value of investment property in Western Europe, including office and retail space as well as big residential developments, rose 7.8 percent in 2006, according to IPD, a London-based research group. The economy is the primary driver. Economic growth was 2.8 percent in Europe in 2006 and is expected to be about 2.7 percent this year, compared with a projected 2.1 percent in the United States. Growth topped 20 percent in Ireland last year and was greater than 10 percent in Britain, France, Spain, and Scandinavia.
Home sales are expected to take a gradual upturn before becoming more pronounced by the end of the year, according to the latest forecast by the NATIONAL ASSOCIATION OF REALTORS®.
NAR has made the following projections on the housing market:
- Existing-home sales: projected to total 6.18 million in 2007 and 6.41 million next year, in contrast with 6.48 million in 2006.
- New-home sales: forecast at 860,000 this year and 901,000 in 2008, down from 1.05 million last year.
- Housing starts: likely to total 1.43 million units in 2007 and 1.49 million next year, below the 1.80 million recorded in 2006.
Other factors to take into account that affect housing include:
- Gross Domestic Product: growth in the U.S. GDP is estimated at 2 percent this year, lower than the 3.3 percent growth in 2006. The GDP is expected to grow 3 percent in 2008.
- Unemployment rate: projected to average 4.6 percent in 2007, unchanged from last year.
- Inflation: expected to decline to 2.5 percent this year, down from 3.2 percent in 2006. Inflation-adjusted disposable personal income is likely to rise to 2.8 percent this year, compared with a 2.6 percent increase in 2006.
Rising energy prices are forcing more families to cut into the budgets they usually would use to pay for housing, food, and even health care, according to a study by Gene Trisko, an environmental attorney and energy economist, on behalf of Americans for Balanced Energy Choices, an organization that supports using domestic coal to generate electricity.
Gasoline accounts for the largest single increase in consumer energy costs with the average retail cost of gasoline increasing by 88 percent to more since 2001.
The study estimates that Americans will spend over $2,900 per family, or 6 percent of after tax income, on gasoline in 2007 with families earning between $10,000 and $50,000 spending 11 percent of after tax dollars on gas.
- Spending on residential energy will consume 10 percent of after-tax income for families earning between $10,000 and $50,000. In the last decade residential energy costs have risen 50 percent overall.
Here is a look at how household energy spending has increased between 1997 and 2007, using projected figures for this year:
- Electricity: 40% increase ($870 in 1997, $1,215 in 2007)
- Natural Gas: 64% increase ($579 in 1997, $949 in 2007)
- Fuel Oil: 96% increase ($714 in 1997, $1,402 in 2007)
- Propane Gas: 76% increase ($500 in 1997, $903 in 2007)
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