Data suggest more struggles lie ahead for homebuilders


A couple of forward-looking indicators for the construction industry are showing tough times ahead, which means Las Vegas won't see any of the 60,000 lost construction jobs coming back soon.

The backlog of projects on the books for contractors nationwide declined 5.4 percent in the first quarter from 7.8 months to 7.4 months, the Construction Backlog Indicator from Associated Builders and Contractors shows.

The amount of construction work under contract to be completed in the future is slightly higher compared with first quarter 2011.

The lull in nonresidential won't end in the near term, ABC chief economist Anirban Basu said. The nation's nonresidential construction activity will remain soft during the summer, with flat to declining nonresidential construction spending, he said.

"I think the backlog has been decreasing for eight months and this is a sign of economic weakness from last year," Basu said in a telephone interview from Washington, D.C. "It caused the postponement of a number of projects in planning. As a result, contractors are working down their backlog faster than they're receiving new contractual volume."

The nation is now three years into economic recovery, and most people in the industry were hoping nonresidential construction would be stabler by now, he said.

"Recovery has been sporadic," Basu said. "I think we could agree that the economic circumstances in Nevada have become better. The state is adding jobs."

In the West, construction backlog expanded by 0.46 months from the fourth quarter, he noted.

Ray Sedey, executive vice president for McCarthy Building in Nevada, said there is some movement in Las Vegas, including new projects such as Marriott Grand Chateau's time share tower and expansion at St. Rose Dominican Hospital's Siena campus.

"It's a little slower than what people would like," Sedey said. "At least there's positive things happening. You're starting to see more projects coming up. We're hiring people for the work we have now and for the future. I would say our backlog year-over-year has increased, but as we move forward, it's still a challenging market, so it's important for us to be diversified."

Another leading construction activity indicator, the Architecture Billings Index, has fallen into negative territory after five months of positive readings. The index reflects the nine- to 12-month lag between architecture billings and construction spending.

The American Institute of Architects reported the April ABI score was 48.4, following a mark of 50.4 in March. A score below 50 reflects a decrease in demand for design services. The new projects inquiry index was 54.4, down from 56.6 the previous month.

Las Vegas is among the markets decimated by pricing declines, said Kermit Baker, chief economist for the Washington, D.C.-based institute.

"If there is demand, it's just working off existing inventory," he said. "I think most of your work for the next few years is going to be upgrades. You're just so used to strong growth ... Now it's just a trickle in the bucket."

The Architecture Billings Index reading was lowest in the West at 48.0, and highest in the Northeast (51.0). The West has been the weakest for the past six to eight months, but the gap between the readings has narrowed to three points, compared with six to eight points in the past, Baker noted.

Sedey said the company is seeing an uptick in activity across the country, but unfortunately, not so much in Las Vegas.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.

 

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