Housing: A Local Look at Residential Construction

What’s happening in the housing market?  There are many economic indicators that are used to answer this question.  The Case-Shiller Home Price Index tracks changes in the value of residential real estate both nationally and in 20 metropolitan regions.  Housing starts are another important indicator, with July numbers released yesterday as reported by MarketWatch and CNN Money.  There is the home-builder confidence index, which is a more subjective measure of the market.  And the list goes on.

We have developed our own Residential Construction index measuring the total wages paid in the Residential Building Construction industry (NAICS 2361).  This category includes builders of new single- and multi-family residences as well as remodelers.  Like all our indexes, it is based on seasonally and inflation adjusted data.

I picked out five counties whose indexes paint a picture of the differences around the country: Hennepin County, MN (Minneapolis); Los Angeles County, CA (Los Angeles); Miami-Dade County, FL (Miami); Orange County, FL (Orlando); and Orleans Parish, LA (New Orleans).  Since Orlando dwarfs the other areas, I include a graphs with and without Orlando.

Orlando experienced a huge building boom starting in 2004, peaking in early 2006, followed by a steep decline starting in early 2007 and not really leveling out until late 2009.  Right now, residential construction in Orlando appears to be in slow decline.  Overall, though, Orlando is the top performer of the five cities.

Miami followed a similar boom pattern as Orlando but on a much smaller scale.  Furthermore, while the downturn has taken Orlando back to pre-boom levels, Miami has ended up well below.  Miami’s residential construction took a more dramatic hit than any of the other four areas when the economy hit the skids in early 2009.  The good news for Miami is that its residential construction appears to have leveled off or even, maybe, started climbing.

Los Angeles followed a similar pattern to Miami’s, except in early 2009 residential construction in Los Angeles continued a steady decline in contrast to Miami falling off a cliff.  Los Angeles appears to be leveling out, but there is not yet any hint of an upturn.

New Orleans shows the impact of Katrina with residential construction sharply depressed immediately after the hurricane, followed by a boom that, to an extent, has continued until the present. New Orleans has lots of ups and downs, but it appears that residential construction there has more-or-less leveled out for now.

Last but not… Sigh…  Last AND least is my home, Minneapolis.  We never soared as high as the others, and we have paralleled the slow, steady decline of Los Angeles, unfortunately starting from a lower base.  Like LA, things seem to be leveling out but there is no sign of an upturn.

Looking at the five together one could conclude that we aren’t out of the woods yet with residential construction, but the trajectory seems to be leveling off.

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