NAHB’s Analysis Shows Gain in Custom Home Building for 2019

Low Mortgage interest rates have supported a surge in custom home building in the fourth quarter of 2019. The NAHB’s analysis of Census Data from the Quarterly Starts and Completions by Purpose and Design survey revealed that custom home building increased at the end of 2019.

The US Census Bureau’s Survey of Construction (SOC) is a survey conducted by the US Census Bureau and partially funded by HUD (Department of Housing and Urban Development). The SOC reports up to date national and regional data on housing starts, completions and characteristics of all residential housing. The data which is collected includes the start date, completion date, sales date, sales price (single-family houses only), and physical characteristics of each housing unit, such as

square footage and number of bedrooms. The Quarterly Starts and Completions by Purpose and Design is based on the Building Permits Survey and from the Survey of Construction (SOC).

The National Association of Home Builder’s analysis shows 44,000 total custom building starts during the fourth quarter of 2019. This is a 16% gain over the same quarter in 2018 which totaled to 38,000 total custom building starts. Data shows a solid gain occurred during the last four quarters with custom housing starts totaling to 177,000.

The custom home building market will continue to expand with demand from both owner and contractor built homes. The low mortgage interest rates will protect the custom home building market thus maintaining the positive custom home building outlook.

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Private Residential Construction Spending Still on the Rise

Decreasing mortgage rates along with solid growth of spending on single-family construction and remodeling have kept the private residential construction up for the sixth consecutive month. According to the National Association of Home Builders, the Census Constructions Spending data reveal a 1.4% increase to a seasonally adjusted annual rate of $540.7 billion for total private residential construction spending this last December.

The National Association of Home Builders provides a monthly estimate of the total dollar value of construction work done called The Value of Construction Put in Place Survey (VIP). On the first day of each month data collection and estimation activities begin for the month. The data that is recorded includes the cost of labor and materials, cost of architectural and engineering work, overhead costs,

interest and taxes paid during construction, and contractor’s profits. The survey is based on construction work that is done each month on improvements to existing structures or new structures for private and public sectors.

The growth in spending on single-family construction and remodeling has been great for the housing industry. Single-family spending was up 2.7% in December 2019 at an annual pace of $289.3 billion. This was 5.2% higher compared to the figures reported in December 2018. The figures included in the private residential improvements were based on spending on remodeling, major replacements, and additions to owner-occupied housing units. In December the figures rose to a seasonally adjusted annual rate of $193.7 billion.

In the second half of 2019, as seen in the graph, there has been solid growth in single-family construction and home improvement. Also shown is new multifamily construction spending which slowed down since last summer but did see solid growth from 2010 to 2016 and a growth spurt from late 2018 to early 2019.

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Greyhound A New Gastropub For Covington

If you are a local then you know about Del Porto Ristorante in downtown Covington. The owners, Torre and David Salazzo, serve delicious Italian cuisine at the local restaurant. The Salazzos want to open a second restaurant that will have a broader selection of food and flavor with a laid back neighborhood vibe. Greyhound will be located just down the street from Del Porto Ristorante and will be a gastropub.

Del Porto Ristorante opened its doors to Covington in 2002. The Solazzos opened the restaurant in a

smaller location than it currently resides. The original had just 10 tables which served “a fresh, seasonal take on regional Italian cuisine, and an alternative to the more prevalent local standard of Creole Italian.” In 2007, Del Porto moved to its larger location and then grew again taking over the adjacent storefront.

Although the new restaurant will be casual with a laid back atmosphere, it will be a cut above traditional tavern-style. There will be a wood-burning oven for pizza along with other fanfares such as burgers, tapas-style dishes, German sausages, fried chicken, Reuben sandwiches, matzo ball soup and beef short ribs just to name a few. Inspiration for the unique menu will come from the “family meals” that are made for the staff at Del Porto. The bar will offer bottled and canned beers with some offered on tap.

“It just opens up a lot of possibilities for us,” Solazzo said. “It won’t be a huge menu, but we keep on putting down all the food we like to eat, so it’s been growing.”

The Greyhound, named after the Greyhound bus station that once resided at 705 E. Boston St., plans

to begin serving lunch and dinner in May 2020. Work on the building has begun and will include configuring the restaurant into a main bar and a separate pizza bar.

“In the years we’ve been here, we’ve seen a lot of young people growing up, we think there’s a need for a place like this that’s more casual,” she said. “We want to stay in our little downtown area and bring something new here.”

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The New Year Starts Off With Mortgage Rates Below Last Year’s Average

A new year has brought good news for the housing industry. The first week reported that the average U.S. fixed rate for a 30-year fixed mortgage averaged at a low 3.72%. The findings were 80 basis points below data reported a week earlier.

George Ratiu, Realtor.com’s chief economist said, “The conventional 30-year loan slid 2 basis points to 3.72% in the first week of 2020. Rates remain about 80 basis points lower than the first week of

2019.”

Ratiu predicts that employment and wage gains will fuel the housing industry. The economy will maintain a moderate growth trajectory this year.

The 15-year FRM also was at a low 3.16% which was down from this time last year’s reportings of 3.99%. The average rate dropped in just one week from 3.19% to 3.16%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage also averaged 3.46% which was lower than the 3.98% reported this time last year.

“As mortgage rates remain favorable, buyers are likely to get a head start on the spring shopping season in the first couple of months of this year,” Ratiu said. “A stronger infusion of new homes in affordable price ranges would be a welcome gift for the New Year.”

Sam Khater, Freddie Mac’s chief economist, believes the rates have maintained around 3.7% for the last couple of months because of ” the combination of improved economic data and market sentiment has led to stability in mortgage rates.”

“The low mortgage rate environment combined with the red-hot labor market is setting the stage for a continued rise in home sales and home prices,” said Sam Khater.

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Companies Choose the Northshore For New Headquarters

Two major companies have announced plans to locate headquarters on the Northshore. Ampirical Solutions and Medline are slated to build two new headquarters in the area.

Ampirical Solutions LLC based out of Mandeville is an electrical infrastructure firm that specializes

in design and construction of electrical substations and switchyards, protective relays and controls, transmission lines, distributions lines and related infrastructure. Customers include investor-owned utilities, municipalities, industrial plants, electrical cooperatives and independent power producers.

The company wants to take the existing St. Tammany Parish locations and combine them into the new 78,000-square foot corporate headquarters on a 5.5-acre site. The new building, located near Covington, will create 400 direct jobs over the next 10 years. The average salary will be more than $85,000 and will include the existing 120 current Ampirical employees. Indirect jobs are expected to be around 350 construction jobs that will result in a $20 million capital investment. The project is projected to be completed by the end of 2020 and would not be taking place without the help from the Louisiana Economic Development, Greater New Orleans Inc. and St. Tammany Corporation.

Medline Industries is the largest privately held company that is both a manufacturer and distributor of medical supplies and clinical programs. The company, based out of Illinois, wants to build a medical distribution center near Covington. The new center will manage packaging and shipment of all medical supplies ordered by the individual health care providers of the Southeast U.S. region, including items such as exam and surgical gloves, face masks, isolation gowns, reusable textiles, incontinence products, electrosurgical products and housekeeping supplies, according to the Louisiana Economic Development press release.

The 53-million dollar distribution center will be located north of I-12 and LA 21. The new building will replace the existing distribution center between Covington and Goodbee. The 800,000 square foot facility will create over 460 new jobs and retain the existing 36 jobs.

“As a member of the Louisiana community for more than a decade, we are very pleased to continue to grow as an employer and investor in the state,” said Bill Abington, executive vice president of global operations for Medline. “With health care growing so rapidly in the region, the location is ideal for easy access to health care providers while also letting us maintain and grow our current team. We are grateful to the state, Louisiana Economic Development and officials in St. Tammany Parish who have recognized the potential of the project and worked to bring it to fruition.”


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Phase One of I-12 Widening in St. Tammany Parish

St. Tammany Parish residents are familiar with the I-12 traffic especially after the May 26, 2018

crash that closed the highway for hours leaving commuters stranded on the eastbound side. The state Department of Transportation and Development is ready to begin the first phase of the $55 million I-12 widening project.

The first phase of the three phase project will be completed by James Construction Group based out of Baton Rouge, LA. The two and a half year first phase will cover 3.26-miles of I-12 between US 190 and LA 59 which over 76,000 vehicles travel per day. A third lane will be added in both directions along with widening bridges over U.S. 190, Ponchitolawa Creek and the Tammany Trace.

“This (first) project is just one phase in the overall three-phase plan to widen this critical corridor to reduce traffic congestion along I-12 and strengthen this section as a vital economic corridor,” DOTD Secretary Shawn Wilson said.

Funds to complete the first phase will come from federal transportation dollars. Funds belonging to the federal transportation that were not used by other states were given to states that had obligated all of their federal highway funding.

“The widening of I-12 in St. Tammany Parish is a project that has been on the books for years but was not able to move forward due to funding,” Gov. John Bel Edwards said in a statement.

As for phase two, which will include widening LA 21 and US 190, will take place west of the first phase. Bids for the second phase will be looked at in the Spring of 2020. Cost will be covered for phase two with a $25 million federal grant, $5 million from the state and $7.2 million from St. Tammany Parish.

Plans are also being made for the third phase that will widen I-12 from LA 1077 to LA 21.

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A 4.1% Rise From November 2018 In Construction Spending

The Census Bureau reported the November 2019 U.S. spending rate for U.S. construction is 4.1% above 2018’s rate for last November. According to the report construction spending amounted to a seasonally adjusted annual rate of $1.324 trillion.

Out of the total construction spending, spending on private construction was 1.6% above November

2018’s and is at a seasonally adjusted annual rate of $985.5 billion. Residential construction spending came in at a seasonally adjusted annual rate of $536.1 in November making it 2.7% up from a year ago.

“Single-family builders are currently reporting ongoing positive conditions, spurred in part by low mortgage rates and continued job growth,” NAHB Chairman Greg Ugalde said. “In a further sign of solid demand, this is the fourth consecutive month where at least half of all builders surveyed have reported positive buyer traffic conditions.

Homebuilders are confident in the current housing market. The National Association of Home Builders and Wells Fargo suggest the sentiment levels are at 70 points making the rate the second-highest level in 2019. The points are 10 points higher than reported this time in 2018.

The positive housing market is expected to continue in 2020. This forecast is based upon the number of applications for new building permits which were at the highest level in November 2019 than they have been in a decade.

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