New house permits in metropolitan Pittsburgh jumped 41.2% in the fourth quarter of 2009, compared with the last quarter of 2008. This is the first indication we’ve seen in two years that the levels of new construction may be ready for a year-over-year increase. Permits for housing units started in October through December totaled 815, versus 577 during the same period in 2008.
Activity levels are still terribly low compared to the historical norms. Even with significantly higher activity in the fourth quarter the number of single-family detached homes started in 2009 was 1517, the lowest for any year since we began tracking activity in 1994. That volume represented a 24.4% decline compared to 2008 starts. The overall housing market fared better, however, with total units permitted (including attached units) declining 16.2% to 2,807.
The outlook for 2010 is brighter, but not sunny. The depressed level of activity in 2009 almost certainly represents the bottom of the market. Local builders have cut their activity and supply remains close to demand. The extension of the tax credit, and improving overall economy should provide enough additional demand to boost new construction comfortably above the 3,000-unit level in 2010. The top municipalities for new construction in 2009 were:
|North Huntingdon Township||81||12||93|
|South Fayette Township||62||8||70|
|Town of McCandless||5||219||224|
|Total Pittsburgh MSA 2009||1,517||1,290||2,807|
|Total Pittsburgh MSA 2008||2,006||1,342||3,348|
Non-residential construction plunged predictably in 2009, with $2.4 billion contracted for the year, a decline of more than one billion dollars, and 31%, from 2008. Contracting slowed dramatically in mid-year, as did planning for new construction. Like housing, non-residential contracting showed some renewed life in the fourth quarter, and bidding activity has been livelier in early January than normal.
Financing remains a key to seeing a commercial construction recovery take shape. There are lots of indications that the global economy is recovering from the financial crisis, and our region seems to be heading in the direction of where the new economy’s jobs will be; however, the financing climate is still not where developers want it to be to make their risk/reward expectations make sense for new development.