• Sign In
  • Create Account
  • Sign Out
  • My Account
  • NEWS
  • PRODUCTS
  • CONTRACTORS
  • ENGINEERS
  • RADIANT & HYDRONICS
  • INSIGHTS
  • MEDIA
  • RESOURCES
  • EMAGAZINE
  • SIGN UP!
cart
facebook instagram twitter linkedin youtube
  • CONTRACTORS
  • BATH & KITCHEN PRO
  • BUSINESS MANAGEMENT
  • HIGH EFFICIENCY HOMES
  • TECHNOLOGY
  • WATER TREATMENT
  • PMC COLUMNS
  • PMC COLUMNS
  • Dave Yates: Contractor’s Corner
  • John Siegenthaler: Hydronics Workshop
  • Kenny Chapman: The Blue Collar Coach
  • Matt Michel: Service Plumbing Pros
  • Scott Secor: Heating Perceptions
  • ENGINEERS
  • CONTINUING EDUCATION
  • DECARBONIZATION | ELECTRIFICATION
  • FIRE PROTECTION
  • GEOTHERMAL | SOLAR THERMAL
  • PIPING | PLUMBING | PVF
  • PME COLUMNS
  • PME COLUMNS
  • Christoph Lohr: Strategic Plumbing Insights
  • David Dexter: Plumbing Talking Points
  • James Dipping: Engineer Viewpoints
  • John Seigenthaler: Renewable Heating Design
  • Lowell Manalo: Plumbing Essentials
  • Misty Guard: Guard on Compliance
  • RADIANT & HYDRONICS
  • RADIANT COMFORT REPORT
  • THE GLITCH & THE FIX
  • INSIGHTS
  • CODES
  • GREEN PLUMBING & MECHANICAL
  • PROJECT PROFILES
  • COLUMNS
  • SPONSOR INSIGHTS
  • COLUMNS
  • Codes Corner
  • Natalie Forster: Editorial Opinion
  • Guest Editorial
  • MEDIA
  • PODCASTS
  • VIDEOS
  • WEBINARS
  • RESOURCES
  • INDUSTRY CALENDAR
  • DIRECTORIES
  • EBOOKS
  • PM BOOKSTORE
  • CE CENTER
  • MARKET RESEARCH
  • CLASSIFIEDS
  • EMAGAZINE
  • EMAGAZINE
  • ARCHIVE ISSUES
  • CONTACT
  • ADVERTISE
  • PME EMAGAZINE ARCHIVES
search
cart
facebook instagram twitter linkedin youtube
  • Sign In
  • Create Account
  • Sign Out
  • My Account
  • NEWS
  • PRODUCTS
  • CONTRACTORS
    • BATH & KITCHEN PRO
    • BUSINESS MANAGEMENT
    • HIGH EFFICIENCY HOMES
    • TECHNOLOGY
    • WATER TREATMENT
    • PMC COLUMNS
      • Dave Yates: Contractor’s Corner
      • John Siegenthaler: Hydronics Workshop
      • Kenny Chapman: The Blue Collar Coach
      • Matt Michel: Service Plumbing Pros
      • Scott Secor: Heating Perceptions
  • ENGINEERS
    • CONTINUING EDUCATION
    • DECARBONIZATION | ELECTRIFICATION
    • FIRE PROTECTION
    • GEOTHERMAL | SOLAR THERMAL
    • PIPING | PLUMBING | PVF
    • PME COLUMNS
      • Christoph Lohr: Strategic Plumbing Insights
      • David Dexter: Plumbing Talking Points
      • James Dipping: Engineer Viewpoints
      • John Seigenthaler: Renewable Heating Design
      • Lowell Manalo: Plumbing Essentials
      • Misty Guard: Guard on Compliance
  • RADIANT & HYDRONICS
    • RADIANT COMFORT REPORT
    • THE GLITCH & THE FIX
  • INSIGHTS
    • CODES
    • GREEN PLUMBING & MECHANICAL
    • PROJECT PROFILES
    • COLUMNS
      • Codes Corner
      • Natalie Forster: Editorial Opinion
      • Guest Editorial
    • SPONSOR INSIGHTS
  • MEDIA
    • PODCASTS
    • VIDEOS
    • WEBINARS
  • RESOURCES
    • INDUSTRY CALENDAR
    • DIRECTORIES
    • EBOOKS
    • PM BOOKSTORE
    • CE CENTER
    • MARKET RESEARCH
    • CLASSIFIEDS
  • EMAGAZINE
    • EMAGAZINE
    • ARCHIVE ISSUES
    • CONTACT
    • ADVERTISE
    • PME EMAGAZINE ARCHIVES
  • SIGN UP!

Aug.10, 2007 - Impacts of financial turmoil on construction segments

By Ken Simonson
August 10, 2007

The worsening housing finance market appears likely to have varied impacts on construction. Lenders have tightened credit standards and raised rates for some-but not all-mortgage applicants. Freddie Mac reported that this week’s average interest rates for new 15- and 30-year fixed-rate and 1- and 5-year adjustable-rate mortgages (of up to $417,000 that meet risk and documentation thresholds) were all close to both the week-ago and year-ago rates. The 30-year fixed-rate mortgage averaged 6.59% with an average 0.4 point for the latest week, compared to 6.68% last week and 6.55% a year ago. But prime “jumbo” loans, the Wall Street Journal reported, have rates “as much as 7.25% or 8%. Usually, such loans cost only about a quarter point more than conforming mortgages, but the gap has ballooned to as much as 0.8% during the past week.” These shifts are likely to mean a further downturn in homebuilding and home sales among both affluent borrowers and “nonprime” borrowers. But one type of revenue-generating construction-rental housing-might receive an offsetting boost if rental demand rises from individuals who no longer qualify for home purchases.

A drop in home sales is likely to mean less spending at home improvement, furniture, furnishings, electronics and yard and garden stores as well as less retail construction in conjunction with new housing developments. Retail spending in general, and therefore retail construction, might be impacted more broadly by tighter lending standards or by stock-market declines that reduce consumers’ wealth. The Journal reported, “Collectively, retailers posted a 2.9% increase in July same-store sales, or sales at stores open at least a year, according to an index of 48 major chains compiled by Retail Metrics Inc. [vs. 3.9% a year ago]. Year to date, same-store sales are up 2.8%, a sharp slowdown from the average gain of 3.7% seen in 2006.”

Retail construction could also slow if tighter credit standards mean that some developers no longer qualify for loans. This impact could similarly affect other types of income-producing properties, such as office, warehouse and hotel construction. Office construction might take a hit as well from reduced demand for space from financial-services firms. For instance, American Home Mortgage Inc. laid off 7,000 (mainly office) workers two weeks ago, shortly before declaring bankruptcy. But the office market does not seem to be affected yet. Gary Rosenberger (www.Econoplay.com) reported, “’At this point we’re not seeing anything directly,’ said Ken McCarthy, a managing director at Cushman & Wakefield in New York City, referring to the impact of troubled credit markets on New York City commercial real estate. He saw no signs of retrenchment in the second quarter or in July in New York City or in the national market as a whole. ‘The market remains strong so far, according to the statistics that we keep. We see nothing that suggests weakening demand for office space.’”

Lower home sales and property values mean reduced property-tax and transfer-tax receipts that fuel construction by many school districts, local governments and some states. The Washington Post reported, “Fairfax County [Va.] officials are predicting that the budget shortfall for the coming year could hit $120 million because the slumping real estate market has led to the lowest annual revenue rate increase in 15 years. One casualty could be the school system….Throughout Northern Virginia, local governments are grappling with falling home sales and prices and more foreclosures, which are driving down real estate assessments. About 60% of Fairfax’s revenue comes from real estate taxes.” The BNA Daily Report for Executives reported Aug. 3, “General revenue collections in Florida will decrease by some $1.5 billion over the coming fiscal year, as ongoing trouble in the state’s housing market spills over into other segments of the economy, a panel of state economists said Aug. 1….Specifically, the panel pointed to decreases in sales, documentary stamp, intangibles and corporate income tax collections.” Although officials quoted in the stories did not mention cuts in any particular spending category, construction typically is reduced when revenues fall short of projections.

Personal income growth accelerated in 252 of the nation’s 363 metro areas (MSAs) in 2006, the Bureau of Economic Analysis (BEA) reported. Construction contributed 0.44% of the 6.6% growth in 2006 and 0.34% of the 5.2% growth in 2005. BEA noted, “Construction was particularly robust in the MSAs with the fastest population growth-St. George, Utah; Bend, Ore.; Cape Coral, Fla.; Myrtle Beach, SC; and Baton Rouge, La….The construction sector in the Gulf Coast MSAs recovering from Hurricane Katrina also made substantial contributions to their personal income growth…Most of the MSAs where construction subtracted from personal income growth were in…Michigan, Ohio, Indiana, Illinois and Wisconsin….Most of the MSAs with the fastest per capita personal income growth had a relatively large mining sector (including oil and gas extraction) or a relatively large manufacturing sector that processes petroleum….The growth in the mining sector had ripple effects on other industries in these MSAs, particularly construction. The construction sector contributed at least 2 percentage points to per capital income growth in Odessa and Beaumont, Tex.”

Share This Story

Looking for a reprint of this article?
From high-res PDFs to custom plaques, order your copy today!

Chief Economist, Associated General Contractors of America 703-837-5313; fax -5406; www.agc.org

Recommended Content

JOIN TODAY
to unlock your recommendations.

Already have an account? Sign In

  • Worker using the Milwaukee Tool SWITCH PACK drain cleaner

    Pipeline profits: Drain cleaning, pipe inspection create opportunities

    Drain cleaning and inspection services offer lucrative...
    Plumbing News
    By: Nicole Krawcke
  • Uponor employee, Arturo Moreno

    The reinvestment in American manufacturing and training

    Plumbing & Mechanical Chief Editor Nicole Krawcke and...
    Plumbing News
    By: Nicole Krawcke and Natalie Forster
  • March 2024 Women in Plumbing hero image of woman engineer overlayed by circle of hexagon shapes with numbers from 1 to 10

    Celebrating 10 Influential Women in the Plumbing Industry

    Celebrating Women's History Month and Women in...
    Plumbing News
    By: Nicole Krawcke
Subscribe For Free!
  • eNewsletters
  • Online Registration
  • Subscription Customer Service
  • eMagazine
  • Manage My Preferences

IPEX celebrates grand opening of new Florida distribution center

IPEX celebrates grand opening of new Florida distribution center

NIBCO Press Solutions

NIBCO Press Solutions

AI can boost efficiency and profitability for plumbing, HVAC contractors

AI can boost efficiency and profitability for plumbing, HVAC contractors

Bell & Gossett Illustrates Path to Net-zero at AHR Expo

Bell & Gossett Illustrates Path to Net-zero at AHR Expo

More Videos

Sponsored Content

Sponsored Content is a special paid section where industry companies provide high quality, objective, non-commercial content around topics of interest to the Plumbing & Mechanical audience. All Sponsored Content is supplied by the advertising company and any opinions expressed in this article are those of the author and not necessarily reflect the views of Plumbing & Mechanical or its parent company, BNP Media. Interested in participating in our Sponsored Content section? Contact your local rep!

close
  • J.J. Keller CMV vehicles on road
    Sponsored byJ. J. Keller & Associates, Inc.

    The dash cam game-changer for small business safety

Popular Stories

Figure 1 is a sketch of the flow problems of the current plumbing system.

Hydronic heating glitch solved: Why adding a circulator won't fix primary loop flow issue

The interior of a government building.

President Trump signs executive order promoting skilled trades and apprenticeships

Underfloor heating installation with drain sewer hole in bathroom close up on water floor heating.

Using hydronics to leverage time-of-use electrical rates

PM BEMIS June 25 Free Webinar: Optimizing Plumbing Solutions for Single-Family, Multi-Family & Public Spaces

Events

November 13, 2024

Future Proofing MEP: Navigating the 2026 High Efficiency Water Heating Standards

Join our deep dive into DOE’s new standards so you can future-proof your MEP practice.

EARN: 0.1 ASPE CEU; 1 AIA LU/HSW; 0.1 IACET CEU*; 1 PDH

View All Submit An Event

Poll

Will business be up or down in 2025?

Do you anticipate business in 2025 to be up or down in comparison to 2024?
View Results Poll Archive

Products

The Water Came To A Stop

The Water Came To A Stop

See More Products

Download the FREE Water Conservation, Quality & Safety eBook: Plumbing Trends Increasing Safe Water Availability

Related Articles

  • Aug. 17, 2007 - Overall PPI, CPI outstrip construction in July; lending standards, rates tighten; IP rises

    See More
  • Aug. 29, 2007 - McGraw-Hill, Reed, AIA, NAR signal strong construction but office market may weaken

    See More
  • Oct. 8, 2007 ― Jobs rise modestly overall and in nonresidential; credit turmoil clouds office outlook

    See More
×

Keep your content unclogged with our newsletters!

Stay in the know on the latest plumbing & piping industry trends.

JOIN TODAY!
  • RESOURCES
    • Advertise
    • Contact Us
    • Directories
    • Store
    • Want More
    • Supply House Times
  • SIGN UP TODAY
    • Create Account
    • eMagazine
    • eNewsletter
    • Customer Service
    • Manage Preferences
  • SERVICES
    • Marketing Services
    • Reprints
    • Market Research
    • List Rental
    • Survey/Respondent Access
  • STAY CONNECTED
    • LinkedIn
    • Facebook
    • Instagram
    • YouTube
    • X (Twitter)
  • PRIVACY
    • PRIVACY POLICY
    • TERMS & CONDITIONS
    • DO NOT SELL MY PERSONAL INFORMATION
    • PRIVACY REQUEST
    • ACCESSIBILITY

Copyright ©2025. All Rights Reserved BNP Media.

Design, CMS, Hosting & Web Development :: ePublishing

search
cart
facebook instagram twitter linkedin youtube
  • Sign In
  • Create Account
  • Sign Out
  • My Account
  • NEWS
  • PRODUCTS
  • CONTRACTORS
    • BATH & KITCHEN PRO
    • BUSINESS MANAGEMENT
    • HIGH EFFICIENCY HOMES
    • TECHNOLOGY
    • WATER TREATMENT
    • PMC COLUMNS
      • Dave Yates: Contractor’s Corner
      • John Siegenthaler: Hydronics Workshop
      • Kenny Chapman: The Blue Collar Coach
      • Matt Michel: Service Plumbing Pros
      • Scott Secor: Heating Perceptions
  • ENGINEERS
    • CONTINUING EDUCATION
    • DECARBONIZATION | ELECTRIFICATION
    • FIRE PROTECTION
    • GEOTHERMAL | SOLAR THERMAL
    • PIPING | PLUMBING | PVF
    • PME COLUMNS
      • Christoph Lohr: Strategic Plumbing Insights
      • David Dexter: Plumbing Talking Points
      • James Dipping: Engineer Viewpoints
      • John Seigenthaler: Renewable Heating Design
      • Lowell Manalo: Plumbing Essentials
      • Misty Guard: Guard on Compliance
  • RADIANT & HYDRONICS
    • RADIANT COMFORT REPORT
    • THE GLITCH & THE FIX
  • INSIGHTS
    • CODES
    • GREEN PLUMBING & MECHANICAL
    • PROJECT PROFILES
    • COLUMNS
      • Codes Corner
      • Natalie Forster: Editorial Opinion
      • Guest Editorial
    • SPONSOR INSIGHTS
  • MEDIA
    • PODCASTS
    • VIDEOS
    • WEBINARS
  • RESOURCES
    • INDUSTRY CALENDAR
    • DIRECTORIES
    • EBOOKS
    • PM BOOKSTORE
    • CE CENTER
    • MARKET RESEARCH
    • CLASSIFIEDS
  • EMAGAZINE
    • EMAGAZINE
    • ARCHIVE ISSUES
    • CONTACT
    • ADVERTISE
    • PME EMAGAZINE ARCHIVES
  • SIGN UP!