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Housing���s 2012 Turnaround T he story of 2012 is filled with historic moments ��� the election, the Olympics, the last Twilight movie ��� but the construction industry will remember it as the time the housing market finally found its post-recession footing. December housing starts set a four-year high, new home sales improved year-over-year for the first time since 2005, and sales of new and previously owned property combined for the largest yearly increase since 1998. Materials Ends 2012 Quietly Prices for construction materials inched down in December, finishing a year of subdued changes in materials costs and bid prices while the industry struggled to sustain growth. The highest gains in the producer price index (PPI) were in gypsum products, which increased 14.0 percent in 2012, indicating demand from new home and apartment construction and renovations of commercial space. Diesel prices climbed 1.8 percent, the smallest gain since 2008, and steel mill products fell 7.9 percent in 2012 after leaping more than 12 percent in This Month in Numbers: January��s homebuilder confidence score, flat since November after seven months of gains. A sub-50 score indicates negative market perceptions. Source: National Association of Home Builders/Wells Fargo New Home Construction, December The pace of both new housing starts and future building permits set fouryear highs in December, the closest the homebuilding industry has been to pre-recession levels since the housing meltdown. Source: U.S. Census Bureau 10 LC DBM The producer price index for construction materials rose 1.3 percent in 2012, as the market caught up with price hikes from previous years. Materials costs rose more than 5 percent in both 2010 and 2011, while bid prices were virtually unchanged in 2010 and rose three to five percent in 2011 (depending on building type) according to an AGC report. both 2010 and 2011, according to the Associated General Contractors of America (AGC) report. AGC officials noted that 90 percent of contractors surveyed for a 2013 business forecast predict materials prices will increase in 2013, and more contractors will try to pass on some of those price increases to customers this year, noting that 29 percent say they will try to raise bid prices this year, compared to 15 percent in 2012. E-15 Ethanol Ruling Upheld Over Industry Protests The U.S. Court of Appeals in the District of Columbia threw out a lawsuit challenging the EPA���s decision to put E15 on the market, upholding a lower court���s opinion that claims of harm from the fuel���s approval made by the petitioners were indirect and speculative. Before last June, widely available ethanol blends maxed out at 10 percent. While EPA says E15 is safe for cars made later than 2001, engine-centric trade groups like OPEI and the American Automobile Association (AAA) claim the blend will damage en- New Home Sales, December annual rate, new home sales (SA) gines and void warranties in smaller engines and older equipment. E15 is expanding so the biofuels industry can meet escalating blending targets established by the Renewable Fuel Standard (RFS) in 2007. The blend is currently available at less than a dozen gas stations across the country. The Outdoor Power Institute (OPEI) is reconsidering a mis-fueling rule challenge over the Environmental Protection Agency���s (EPA) small E15 indicator label, which does not sufficiently warn small engine users of the dangers posed by the ethanol content in the fuel, according to the group. OPEI was one of several sponsors of the E15 lawsuit. rate change since November 2012 (SA) new home sales annual rate peak (millions), March 2005 rate change since December 2011 (SA) annual rate, new housing starts, seasonally adjusted (SA) annual rate, new building permits, (SA) housing starts rate change since December 2011 (SA) housing starts annual rate peak (millions), January 2006 building permits rate change building permits annual since December 2011 (SA) rate peak (millions), September 2005 Winter finally reached the rate of new home sales in December, as sales fell from November���s revised rate of 398,000. An estimated 367,000 new homes were sold in 2012, 19.9 percent above the 306,000 units sold in 2011. Source: U.S. Census Bureau