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year ago, the economy seemed poised for stronger, sus- tainable economic growth. However, with the continu- ing debt crisis within the European Union, consumer and business confidence stateside waned. Private sector growth entered a period of slowdown.
A
Construction Outlook STABLE FOR 2012 PCA's
Furthermore, the American Recovery & Reinvestment Act stimulus decreased as a positive for economic growth, forcing the Federal Re- serve to enact a new round of monetary stimulus to avert the potential of a double-dip recession.
Portland Cement Association's most recent forcast had a slow re- covery outlook. The residential sector is still plagued by a large vol- ume of foreclosures, tight lending standards and weak new home prices. PCA represents 98 percent of U.S. cement manufacturers and the Chicago Federal Reserve has recognized PCA's Ed Sullivan as the most accurate economic growth forecaster two years in a row. "Single family housing is on the way back, so we may see some marginal growth," predicted Sullivan. "Non-residential construction hasn't picked up in over a year, but we've seen some movement in retail, industrial and health industries."
"Each construction sector has its own set of problems," said Sul- livan. "Multifamily starts were up 55 percent last year and we expect to see double digit gains this year. Single family structures have fore- closure issues as banks have delayed the process."
Economic Outlook
"The construction industry has been hit hard and it's going to take a while to see sustained improvement," said Sullivan. "This construc- tion industry and job situation mirrors what's going on in the overall ecomomy."
PCA has reduced its projections for near term economic growth and job creation. Job creation is key to generating household forma- tion and favorable homebuyer affordability, lowering nonresidential vacancy rates and raising return on investments and reducing state deficits. The reduction in PCA's job creation outlook translates into a longer wait for a construction and cement consumption recovery.
2012 Market Outlook
Despite obstacles and challenges, some builders are feeling optimis- tic about their prospects for 2012, according to the 2012 Market Out-
Ongoing Recession
Business Banking/ Funding for Projects
Mortgage Banking - Getting Customers Qualified
Continued Softness in Home Prices
Government Regulations Competing with
Foreclosed Homes
Competing with Other Builders
0 10
18.1 17.7 17.5
20 30
25.1 24.8
30.3
Energy Efficient Homes
Diversification
Recession-Proof Upscale Clients Smaller Homes
40
2012 Top Challenges 50
According to Professional Builder's 2012 Market Outlook Survey, lack of builder and buyer financing and the overall economy were cited as top business challenges heading into 2012. More than half of survey respondents (50.5 percent) said the ongoing recession will be a key business obstacle, while 30.3 percent said business banking will be a top challenge.
38 LC DBM
Narrow Focus on Specific Clients
60 0 5 10 15 20 15 27
What are your top residential opportunities heading into 2012? 25
24.2 30 35
When it comes to key growth opportunities for 2012, 36.8 percent cited remodeling activities, followed by building energy-efficient homes (33.3 percent), diversifying their service offering (29.9 percent), and focusing on upscale clientele (27 percent).
40 29.9 33.3 50.5
Construction Put-in-Place (Billions) Forecast
The Portland Cement Association projected construction activity for the next few years for total dollar value of construction done in the U.S. A significant improvement in residential construction cannot begin until the foreclosure crisis is over. A high level of foreclosures increases inventory levels and depresses home prices – adversely impacting homebuilders' expected return on investment.
look Survey by Professional Builder (a 75-year old magazine targeted at residential building contractors). More than four in 10 survey respon- dents said they anticipate higher revenue in 2012, while only about 22 percent expect revenue to drop.
Silver Linings for Construction
On the brighter side, nearly half of the survey respondents (49.7 percent) said their firms were in at least good financial health, and 80.2 percent said their companies would at least hold steady in rev- enue in 2012. Looking toward 2012, nearly half of respondents (46.8 percent) of the survey said they thought their companies would be beefing up PR and marketing initiatives to revive their businesses.
Healthcare Remains Strongest Sector
Respondents were asked to rate their firms' prospects in specific construction sectors on a five-point scale from excellent to very weak. Healthcare was the most highly rated sector, with a strong majority of respondents (54.6 percent) giving it a good to excellent rating. Data centers and mission-critical facilities were also given good
marks, with 45.2 percent of respondents in the good/excellent catego- ry, followed by government and military work at 41.1 percent.
Remodeling 36.8