Construction Informer

Crane Carnage Continues: A 46,000 pound crane section fell on a man who was unloading it from a trailer at a Washington State construction site. The tie-down straps broke. He was 46 years old. In a separate incident in Colorado a worker was moving a self-propelled crane belonging to a custom homebuilder when it unexplainably accelerated, went out of control and dropped into a dry creek bed. The driver of the crane was killed. In yet another incident a worker was killed at a Chicago Heights steel plant when part of the crane he was operating fell on him and killed him. Still, NYC contractors continue complaining about what they call “unwieldy” new regulations imposed by that city in the wake of the federal government’s first updates to crane safety regulations in 40 years. Citing shutdowns caused by missing pieces of paperwork, or messy sites, the NYC contractors claim costly delays are developing.

Institutional Construction Set for Decline: The Architectural Billings Index (ABI) sank to its lowest level in its 13-year history for nonresidential construction. This means that spending on healthcare and educational facilities has once again dropped and that construction nine to 12 months out will be affected. Apparently governments and non-profits are having trouble getting bond approvals for such projects.

Canadian Charity Finds Construction Money Creatively: In a refreshing instance of people with religious convictions actually working together instead of fighting one another the Multifaith Housing Initiative in Ottawa negotiated a second mortgage with the seller of a building in order to fund the creation of 27 units of low-income housing at the site. The organization has Christians, Jews, Muslims, Hindus and Sikhs on its board, owns 40 affordable housing units in Ottawa, and will use an $840,000 grant from the Ontario government to renovate the building and pay down mortgages on a separate affordable housing building.

As the headlines screamed of the large decline in building permits issued in September, and the plunge in new home construction reaching its lowest in six decades, what went largely unreported is just how important those events may be for housing’s recovery. With building permit issuances finally getting into the 700,000s, and if historical records will hold true, the bottom may be here. 

The number of housing building permits issued in the 48 years from January 1960 to January 2008 has never dropped below 709,000, and whenever the numbers did hit rock bottom they did it in the 700s. In November of 1966 it was 736,000, in March of 1975 it was 709,000, in October of 1981 it was 731,000, and in January of 1991 it was 786,000.

Of course the climb back up could easily take several quarters. The 1966 dive took a year to get back to its previous high. The 1975 adjustment never did recover fully to its previous high of more than 2,300,000 permits issued, but it did get back to an average number in about three years. That was three years of a lot of ups and downs though. The 1981 slide climbed out in 20 months and the 1991 market adjustment did it in 34 months. 

Being at or near the bottom of this cycle means it’s a good time to be reviewing business practices and long-term plans with an eye toward avoiding the kinds of things that may have ended up hurting this time around. The realistic way to view the construction cycles is simply with an understanding that they are going to happen. They offer great learning opportunities for those who are willing to learn.