Third Quarter Housing Starts Plunge on Recession Fears

The tidal wave of bad financial market news that began in July seems to have spilled over into western PA in the third quarter. Pittsburgh’s economy is as solid as it’s ever been, but the fear of the national recession seems to have put enough fear into the market to drag it down. Even though job creation is positive in western PA, it is understandable that potential home buyers would look forward six to twelve months with some uncertainty.

 

During the January through September period 1,609 permits were issued for single-family detached units, down 12.6% from the same period last year. The market for single-family attached and multi-family units was down further, with 1,056 units started compared to 1,270 during the first three-quarters of 2007.  The overall housing market was down 14.3%.  Activity was a mirror image to 2007 when housing permits increased over the second quarter. Permits granted in third quarter 2008 for detached housing totaled 458 units compared with 587 last year, and the overall totals were 873 compared to 1,217 in 2007. That represents a 22% and 29% decline respectively.

 

The one submarket that seems to be immune to the downturn is within the city of Pittsburgh. There has been two-and-a-half times the new construction in the city as in the next most active suburb.

 

Non-residential construction remained strong in the quarter, with more than $1 billion in contracts awarded.  Contracting during January-September was $2.7 billion, a 13% increase over the first nine months of 2007.  The difference between this year and 2007 is that the pipeline is clearly drying up.  The fourth quarter should have another half-billion or more in new contracts, but a lot of that is already on the books. Bidding between Labor Day and early October is off significantly. This is usually the time when last-minute bids go out for construction before the weather breaks. The steep decline in the capital markets has pulled the rug out from under a strong market, and it’s looking like a lot of projects are being deferred until there is more certainty about the economy.

 

Energy and manufacturing projects are still advancing rapidly, and should fuel a couple of billion dollars worth of work in 2009, but those markets are served by relatively few firms. The mainstream commercial and institutional projects are increasingly being shelved. And some of the bigger institutional owners are paring back. West Penn Allegheny Health System has delayed the construction of a new ER at the Alle-Kiski facility in Natrona Heights, and UPMC has cut back capital budget spending, although the new $200 million Monroeville center appears to be moving ahead this quarter.

 

The totals listed below represent the number of new housing units for which building permits were issued, excluding mobile homes and elderly care complexes.  The top areas were:

 

Municipality

#SFD

#SFA

Total

Single-Family Detached

 

 

 

North Huntingdon Township

78

16

94

Adams Township

76

55

131

Pittsburgh

73

263

336

Peters Township

69

2

71

Moon Township

63

8

71

South Fayette Township

55

4

59

North Strabane Township

54

31

85

Franklin Park

52

15

67

Cranberry Township

46

45

91

Jefferson Hills

45

4

49

 

 

 

 

Single-Family Attached

 

 

 

Pittsburgh

73

263

336

Adams Township

76

55

131

Cranberry Township

46

45

91

Slippery Rock Township

9

40

49

Slippery Rock

4

40

44

South Park

10

40

50

 

 

 

 

Total Pittsburgh MSA 2007:3

1,841

1,270

3,111

Total Pittsburgh MSA 2008:3

1,609

1,056

2,665

% Change

-12.6%

-16.9%

-14.3%

 

 

 

 

By County

SFD

SFA

Total

Allegheny

730

615

1345

Beaver

91

31

122

Butler

213

218

431

Fayette

89

12

101

Washington

228

94

322

Westmoreland

258

86

344

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