[NEWS TRACKER] Spike in Building Costs Could Be Problematic for Home Building's Future

New home sales rose in August, but an increase in home building costs could be a problem going forward; plus more construction industry news on the October 10, 2019, edition of Construction News Tracker.

Construction News Tracker is presented by Caterpillar and produced by ForConstructionPros.com.

The U.S. Commerce Department reports a healthy increase of 7.1% in August in new home sales. That accounts for a seasonally adjusted rate of 713,000 units  up from a revised rate of 666,000 in July. The market appears to be spurred by low interest rates as year over year it is up 6.4%. However, a spike in home building costs could portend to be a problem going forward. Average sales prices are now at $404,200 a jump of 6.1% from 2018, according to the National Association of Home Builders. Home building in the $200,000 range accounted for only 10% of the total building in progress in August.

Heavy construction employment resulted in increases in 39 states over the last year while 29 states added jobs between July and August. ABC’s analysis of Labor Department figures point to the continued shortage of craft workers, and Chief Economist Ken Simonson says that even more states would have posted employment gains if contractors could find enough workers to hire. The national unadjusted unemployment rate rose in 31 states in August, according to ABC.

Dodge Data reports that new construction starts were down 6% in August to a seasonally adjusted rate of $807.1 billion. That now breaks three consecutive months of gains in the category led by nonbuilding construction which dropped 15% in August while declines in both residential and nonresidential construction were much milder at 1% and 3% respectively. These numbers caused the Dodge Index to fall from 182 in July to 171 in August. However, it still remains above its 2019 average of 167. Total construction starts have now fallen 5% from its position in 2018.

Billions in transportation dollars could be in jeopardy if the Trump Administration follows through with its threat to withhold money from California. Arguing the state has failed to tally steps to improve its air quality, the EPA is moving to keep billions in federal funding from being available to the Golden State. California elected officials call it a brazen political stunt if the feds move to withhold air quality plan funding as well as highway funding money.

House Transportation Committee Chairman Peter Defazio is applying pressure to colleagues as well as the White House to collaborate on an infrastructure funding policy this fall, though its doubtful the parties will come together before next year. A potential deal fell apart last May when the President walked out on congressional leaders. The current legislation expires in fall of 2020.

The fifth allotment in airport infrastructure grants amounting to $986 million has been approved by the U.S. DOT. Secretary Chao said the funding will go to 354 airports in 44 states for upgrades and reconstruction projects. It's part of the $3.18 billion airport improvement program funding allocated since 2018.

And the Federal Highway Administration last month came through with $871 million in emergency funding. Thirty-nine states are in line to receive the money to repair roads and bridges damaged by storms, floods and fires.

Contractors sure do like to rent equipment. A recent survey conducted for the American Rental Association finds that 93% of contractors rented equipment in the last year. The survey claims that 92% plan on renting as much in 2019 as last year while 52% say they will increase their equipment rentals going forward. Lifts and scaffolding, backhoes, dump trucks and mini excavators appear to be the most popular items rented. Forty-five percent of you claim its more financially affordable to rent than to buy.

As the deadline for filing formal comments to a revised federal rule dealing with apprenticeships came due the U.S. Department of Labor now has a problem on its hands. Over 325,000 of you responded to the filing request. The new regulation would apply to many industries, but for construction in particular, it requires a provision to exempt the field of further apprenticeship inclusion. Construction industry officials are incensed over the idea to permit schools, states and even unions to run the programs as opposed to the Department of Labor itself, which has done it for years.

A recent survey conducted by Rabbitt, a construction software firm, and Procore, which deals in construction management software, has discovered some problems for  contractors. The survey conducted in the last two months centered on working capitol and bidding decisions. It found that over the past 12 months slow payments for construction work totaled $64 billion. Contractors as well as subs estimate the practice adds 5% to the total cost of projects. The survey also found that 63% of subs refused to bid on projects where they knew of a contractors bad payment history while 72% offered discounts for payment in a 30 day window.

In closing, since praise reassures individuals, it helps them neutralize doubts they have about themselves.

This is Construction News Tracker looking over the industry that makes the world a better place, presented by Caterpillar and produced by ForConstructionPros.com.

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