Housing Construction Growth Anemic, Commercial Healthy in 3rd Quarter

Construction activity for both residential and non-residential buildings improved during the first nine months. Housing activity was up 12% over the first three quarters of 2010 and non-residential construction was up 18%. While the percentage of volume growth seems robust, the increases appear stronger because of last year’s depressed levels.

 Every measure of a housing market shows that thePittsburghmarket is doing well, especially relative to the rest of the country. But the steady price appreciation and decent sales figures are aided by the fact that new home construction is about half what it was just five years ago.

During the January through September period 1,264 permits were issued for single-family detached units, up from 1,232 last year. Permits for attached units did spike however, with 891 units started compared to 691 during 2010.  The overall housing construction market saw 2,155 units started compared to 1,955 last year.

 Contracts for non-residential construction totaled $2.1 billion (excluding the $1.2 billion Allegheny Ludlum plant) compared to $1.78 billion during the same period in 2010. Commercial contracting is showing some renewed strength. Office vacancy rates are at their lowest levels in two generations. Manufacturing and industrial construction is up sharply, especially for structures related to the natural gas exploration and its supply chain. With strong demand in education and healthcare, especially with the significant investment Highmark will make in West Penn Allegheny facilities, most major categories in non-residential construction should be improving through the fourth quarter of 2011 and into 2012.

 The three potential roadblocks for a decent recovery over the next twelve months would be some sort of global or national government action – like a repeat of the debt ceiling debacle – that sparked fear and chilled progress, continued difficulty in financing projects instead of continued improvement and some sort of legislative action that made the current plans of UPMC and Highmark uncertain. Barring that there is too much demand coming from the gas industry and from the constrained supply to hold back recovery next year.

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:

Source: Pittsburgh Homebuilding Report

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