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Construction Markets Benefiting From Historically Low Rates

July 09, 2013, 07:02 AM
Filed Under: Construction

According to the GE Capital 2Q 2013 Construction Industry Research Monitor, the housing recovery strengthened in 2012 and is expected to experience additional but more gradual growth in 2013, supported by low mortgage rates.  The report notes homebuilding activities have generally been improving over the last several months and the trend is expected to continue, albeit at a slightly reduced rate, due to challenges posed by Fed policy, sequestration and budget cuts.

In 1Q13, both housing starts and new home sales increased over 30%. Inventories, which were at a 12-year low in March, have been one of the driving force behind strong housing starts and home prices, according to the report.

Key developments noted in the report include:

  • Home prices rose at an annual rate of almost 11% in March as measured by the Case-Shiller 20 City Home Price Index, the fastest pace since 2006.
  • The rise in home prices is likely to slow somewhat as the market focuses on when the Fed will begin tapering or raising rates following this long period of easing.
  • Construction markets continue to benefit from relatively low historic 30 year mortgage rates, and a decline in distressed inventory.
  • Low rates and inventory have been partially offset by concerns over Fed policy and a slowdown in consumer spending.
  • Housing starts are still below the bubble years. The average housing starts during 1Q13 was 969,000 units, well below the 1,461,000 units during the peak in the first quarter of 2007.
  • Total construction spending averaged $862Bn in 1Q13, a decline of 3% over 4Q12.

To read the full GE Capital 2Q 2013 Construction Industry Research Monitor, click here.

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