Housing Construction Begins to Rebound in Fourth Quarter

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:

Municipality #SFD #SFA Total
Single-Family Detached      
North Huntingdon Township 81 12 93
Peters Township 67 2 69
Jefferson Hills 64 0 64
South Fayette Township 62 8 70
Adams Township 59 73 132
Moon Township 54 16 70
Richland Township 52 32 84
Cranberry Township 51 46 97
Pittsburgh 51 244 295
Ohio Township 46 27 73
       
Single-Family Attached      
Pittsburgh 51 244 295
Town of McCandless 5 219 224
Adams Township 59 73 132
Ross Township 5 69 74
Cecil Township 32 51 83
       
Total Pittsburgh MSA 2009 1,517 1,290 2,807
Total Pittsburgh MSA 2008 2,006 1,342 3,348
% Change -24.4% -3.9% -16.2%
       
By County SFD SFA Total
Allegheny 660 873 1533
Beaver 109 18 127
Butler 185 168 353
Fayette 88 2 90
Washington 217 171 388
Westmoreland 258 58 316

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.

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