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About


The Atlanta Fed's SouthPoint offers commentary and observations on various aspects of the region's economy.

The blog's authors include staff from the Atlanta Fed's Regional Economic Information Network and Public Affairs Department.

Postings are weekly.


August 22, 2014

Southeast Commercial Construction Update: Activity Up from Last Year

At the national level, total nonresidential construction spending fell 2.78 percent between May and June but increased 4.6 percent from the year-earlier level. Because nonresidential construction projects tend to take place over longer time horizons, it’s useful to aggregate the data by quarter to smooth out their short-term volatility. Doing so reveals that nonresidential spending increased slightly (just shy of 2 percent) between the first and second quarters of 2014 and that it increased by 6.7 percent from the second quarter in 2013.

Does the Southeast commercial construction picture align with the national one? The Atlanta Fed polls southeastern business contacts engaged in commercial construction each quarter to track and better understand regional trends in construction activity. The latest poll results appear to echo the national story, suggesting that a pickup in commercial construction activity was sustained through the second quarter of 2014.

Most respondents indicated that the pace of nonresidential construction activity in the Southeast was either ahead of the year-earlier level or remained unchanged from the year-earlier level. All contacts reported that the pace of multifamily construction had increased from year-earlier levels (see the charts).

Pace of Nonresidential Construction Activity versus a Year Ago Pace of Multifamily Construction Activity (units) versus a Year Ago

Several comments from respondents help to illustrate these trends:

  • “More projects to go after in all markets, but competition is still very intense.”
  • “Multifamily supply continues to grow at a strong pace.”
  • “For the first time in six years we are beginning to see much larger projects in the healthcare, commercial and industrial markets.”
  • “Apartment construction remains at a high level and brings concerns that the market will become overbuilt. Each month it seems there are more announcements for new apartment projects.”

Half of all respondents reported that backlog was greater than the year-earlier level; the other half indicated that backlog was similar to the year-earlier level. Although this response represents a drop from the last two quarterly measures of 89 percent and 76 percent, it is still an indication that the pipeline of future activity remains fairly robust.

The number of respondents reporting that the amount of available credit met or exceeded demand continued to increase from earlier reports. Sixty-eight percent of contacts in the second quarter 2014 indicated that credit was sufficient, compared with 60 percent the previous quarter and 57 percent one year earlier (see the chart).

How available do you perceive commercial construction finance to be in your market?

The majority of contacts reported that they plan to increase hiring during the next quarter. Seventy-five percent of contacts in the second quarter 2014 reported that they were planning to do modest to significant hiring, slightly down from 79 percent the previous quarter but up from 57 percent one year earlier (see the chart).

Hiring Plans for Next Quarter versus This Quarter

Compared with a year earlier, more contacts (roughly one out of three) indicated that they were having a difficult time filling positions (see the chart).

Difficulty Filling Positions versus a Year Ago

All contacts reported some degree of upward pressure on labor costs. Sixty percent of contacts indicated that their labor costs had increased more than 3 percent from year-earlier levels. A growing share reported labor cost increases of 6 percent or more (see the chart).

Labor Costs versus a Year Ago

The next poll will open on October 6, 2014. If you are a commercial contractor and would like to participate in this poll, please let us know by sending a note to RealEstateCenter@atl.frb.org.

Note: Second quarter 2014 poll results were collected July 7–16, 2014 and are based on responses from 20 business contacts. Participants of this poll included general contractors, subcontractors, lenders, developers, and material fabricators with footprints of varying sizes across the Southeast.

Photo of Jessica DillBy Jessica Dill, senior economic research analyst in the Atlanta Fed's research department


August 1, 2014

Southeast Housing Update: Building on Recent Gains

To detect emerging real estate trends, the Atlanta Fed conducts a monthly poll of southeastern broker and builder business contacts. The latest poll results suggest that housing market conditions in the Southeast remain positive.

The majority of brokers (60 percent) and builders (63 percent) indicated that home sales had increased from the year-earlier level (see the chart):

SE Home Sales versus a Year Earlier

The home sales outlook among contacts remained fairly upbeat. More than 80 percent of brokers and just under 50 percent of builders expect to see continued growth in home sales (see the chart):

SE Homesales Outlook versus a Year Earlier

More than half of the brokers and close to three-fourths of the builders reported that buyer traffic was up from the year-earlier level (see the chart):

SE Buyer Traffic versus a Year Earlier

Most brokers and builders reported that home inventory levels remained flat or were down from the year-earlier level (see the chart):

SE Home Inventory versus a Year Earlier

The majority of brokers and builders reported that home prices were up in June compared with year-ago levels (see the chart):

SE Home Prices versus a Year Earlier

More than three-fourths of builders reported that construction activity had increased from the year-earlier level (see the chart):

SE Construction Activity versus a Year Earlier

To explore these results in more detail, please visit our Construction and Real Estate Survey page.

Note: The latest poll results are based on responses from 40 residential brokers and 19 homebuilders and were collected July 7–16, 2014. Please sign up if you would like to participate in this poll.

July 7, 2014

To Buy or Not to Buy, That Is the Question (for Millennials)

In the last month, the South Florida Business Journal reported on the announcement of at least three new apartment projects:

  • June 18: Developers plan 300 apartments in Midtown Miami
  • June 19: Lennar plans 229 apartments in Boca Raton after $7.5M purchase
  • June 23: Broward commissioners to vote on 400-apartment project

Data from the real estate analytics firm REIS indicate that 2,425 new apartment units were completed in Miami in 2013. Not only is this noteworthy because this represents the most units delivered per year since 1991 but also because nearly all of the units were absorbed. More than 600 units have been delivered so far in 2014, and close to 3,000 units remain under construction. Despite this comeback in Miami apartment construction, the apartment vacancy rate ended the first quarter at 3.8 percent and is expected to remain at this low level for an extended period. Is apartment construction heating up in South Florida as a result of a change in fundamental beliefs of the rising generation?

According to an article featured in the latest issue of the Atlanta Fed's EconSouth, the generation known as the millennials is showing signs of veering from established patterns, particularly when it comes to milestones like moving out of the parents' house, getting married, and buying a home. Many experts, including Atlanta Fed economist Tim Dunne (who has written extensively on the topic, including this article), acknowledge that economic conditions are partly to blame for these delayed decisions.

But are these decisions only being delayed, or have preferences changed? Reports from some Atlanta Fed business contacts suggest that attitudes and preferences may in fact be changing. Some business contacts report that, unlike previous generations, millennial employees are often unwilling to commit long term to one organization, preferring instead nonmonetary perks such as flex time over higher pay, and they place great value on work-life balance. Moreover, real estate business contacts in South Florida have noted that millennials prefer the "experience" that often comes with high-end apartments, such as amenities including dining and shopping, rather than a traditional home in a suburban setting.

More than shifting preferences may be at work, though. According to Fannie Mae’s national housing survey, conducted in May 2014, potential first-time homebuyers are facing several challenges that inhibit their ability to purchase a home. Although the survey does confirm that the number of renters has increased on a national basis, and the number of homeowners has declined, since the financial crisis, the survey's findings indicate that potential homebuyers are not renting by choice but rather by necessity. Higher credit standards and increasing home prices have hindered potential homebuyers. The survey results suggest that younger renters aspire to own but feel pessimistic about their ability to get a mortgage, perceiving down payment and credit score requirements as obstacles. The survey also reported that young renters aspire to own for financial and lifestyle reasons, although a smaller share of respondents (versus last year) reported that their primary reason for renting is to prepare them for homeownership.

For the rental market, the question remains whether that segment's growth is a permanent shift by millennials or merely a bridge until this generation is better prepared to become homeowners.

By Marycela Diaz-Unzalu, a Regional Economic Information Network analyst in the Atlanta Fed's Miami Branch

July 1, 2014

Southeast Housing Update: Home Prices Increasing, If Only Slightly

To detect emerging real estate trends prior to the release of the official statistics, the Atlanta Fed conducts a monthly poll of Southeast broker and builder business contacts. The latest poll results came in a few weeks ago and revealed the following:

  • More builders, but fewer brokers, indicated that home sales had increased from the year-earlier level. Contacts were much less optimistic about future sales growth than they were a year earlier.
  • Fewer brokers, but more builders, noted that inventory levels were down from the year-earlier level.
  • Most brokers and builders continued to report that home prices increased slightly in May compared to year-ago levels.
  • Fewer builders reported an increase in construction activity from month-earlier and year-earlier reports, but their outlooks remained optimistic and largely unchanged from the year-earlier level.

To view the latest poll results in more detail, please visit the Atlanta Fed's Construction and Real Estate Survey page.

Thoughts on credit availability
After more than a year of periodically posing questions about mortgage and construction and development finance, we decided to include the credit questions on a monthly basis starting in January 2014. In the latest poll, roughly two-thirds of brokers and builders reported that the amount of available mortgage finance was either equal to or greater than the amount of demand this month (see the charts).

Housing_update

Most builders, on the other hand, continued to report that the amount of available construction and development finance fell short of demand (see the chart). Because we didn't start asking this question until 2012 (and, again, at that point only intermittently), it is hard to say how this perception compares to how conditions were viewed before the housing downturn.

Builders

In an attempt to put things in perspective, we posed a special question in June to builders asking them how the availability of construction and development finance now compares with the availability four, six, eight, and 10 years ago. Most builders reported that construction and development finance is more available now than it was four years ago in 2010. The results for 2008 were somewhat mixed. Builders were almost unanimous in reporting that construction and development finance is less available now than it was in 2004 and 2006 (see the chart).

Availability_construction

Note: The latest poll results are based on responses from 38 residential brokers and 19 homebuilders and were collected June 2–11, 2014. If you would like to participate in this poll, please sign up.

Photo of Jessica DillBy Jessica Dill, senior economic research analyst in the Atlanta Fed's research department

August 22, 2014

Southeast Commercial Construction Update: Activity Up from Last Year

At the national level, total nonresidential construction spending fell 2.78 percent between May and June but increased 4.6 percent from the year-earlier level. Because nonresidential construction projects tend to take place over longer time horizons, it’s useful to aggregate the data by quarter to smooth out their short-term volatility. Doing so reveals that nonresidential spending increased slightly (just shy of 2 percent) between the first and second quarters of 2014 and that it increased by 6.7 percent from the second quarter in 2013.

Does the Southeast commercial construction picture align with the national one? The Atlanta Fed polls southeastern business contacts engaged in commercial construction each quarter to track and better understand regional trends in construction activity. The latest poll results appear to echo the national story, suggesting that a pickup in commercial construction activity was sustained through the second quarter of 2014.

Most respondents indicated that the pace of nonresidential construction activity in the Southeast was either ahead of the year-earlier level or remained unchanged from the year-earlier level. All contacts reported that the pace of multifamily construction had increased from year-earlier levels (see the charts).

Pace of Nonresidential Construction Activity versus a Year Ago Pace of Multifamily Construction Activity (units) versus a Year Ago

Several comments from respondents help to illustrate these trends:

  • “More projects to go after in all markets, but competition is still very intense.”
  • “Multifamily supply continues to grow at a strong pace.”
  • “For the first time in six years we are beginning to see much larger projects in the healthcare, commercial and industrial markets.”
  • “Apartment construction remains at a high level and brings concerns that the market will become overbuilt. Each month it seems there are more announcements for new apartment projects.”

Half of all respondents reported that backlog was greater than the year-earlier level; the other half indicated that backlog was similar to the year-earlier level. Although this response represents a drop from the last two quarterly measures of 89 percent and 76 percent, it is still an indication that the pipeline of future activity remains fairly robust.

The number of respondents reporting that the amount of available credit met or exceeded demand continued to increase from earlier reports. Sixty-eight percent of contacts in the second quarter 2014 indicated that credit was sufficient, compared with 60 percent the previous quarter and 57 percent one year earlier (see the chart).

How available do you perceive commercial construction finance to be in your market?

The majority of contacts reported that they plan to increase hiring during the next quarter. Seventy-five percent of contacts in the second quarter 2014 reported that they were planning to do modest to significant hiring, slightly down from 79 percent the previous quarter but up from 57 percent one year earlier (see the chart).

Hiring Plans for Next Quarter versus This Quarter

Compared with a year earlier, more contacts (roughly one out of three) indicated that they were having a difficult time filling positions (see the chart).

Difficulty Filling Positions versus a Year Ago

All contacts reported some degree of upward pressure on labor costs. Sixty percent of contacts indicated that their labor costs had increased more than 3 percent from year-earlier levels. A growing share reported labor cost increases of 6 percent or more (see the chart).

Labor Costs versus a Year Ago

The next poll will open on October 6, 2014. If you are a commercial contractor and would like to participate in this poll, please let us know by sending a note to RealEstateCenter@atl.frb.org.

Note: Second quarter 2014 poll results were collected July 7–16, 2014 and are based on responses from 20 business contacts. Participants of this poll included general contractors, subcontractors, lenders, developers, and material fabricators with footprints of varying sizes across the Southeast.

Photo of Jessica DillBy Jessica Dill, senior economic research analyst in the Atlanta Fed's research department


August 1, 2014

Southeast Housing Update: Building on Recent Gains

To detect emerging real estate trends, the Atlanta Fed conducts a monthly poll of southeastern broker and builder business contacts. The latest poll results suggest that housing market conditions in the Southeast remain positive.

The majority of brokers (60 percent) and builders (63 percent) indicated that home sales had increased from the year-earlier level (see the chart):

SE Home Sales versus a Year Earlier

The home sales outlook among contacts remained fairly upbeat. More than 80 percent of brokers and just under 50 percent of builders expect to see continued growth in home sales (see the chart):

SE Homesales Outlook versus a Year Earlier

More than half of the brokers and close to three-fourths of the builders reported that buyer traffic was up from the year-earlier level (see the chart):

SE Buyer Traffic versus a Year Earlier

Most brokers and builders reported that home inventory levels remained flat or were down from the year-earlier level (see the chart):

SE Home Inventory versus a Year Earlier

The majority of brokers and builders reported that home prices were up in June compared with year-ago levels (see the chart):

SE Home Prices versus a Year Earlier

More than three-fourths of builders reported that construction activity had increased from the year-earlier level (see the chart):

SE Construction Activity versus a Year Earlier

To explore these results in more detail, please visit our Construction and Real Estate Survey page.

Note: The latest poll results are based on responses from 40 residential brokers and 19 homebuilders and were collected July 7–16, 2014. Please sign up if you would like to participate in this poll.

July 7, 2014

To Buy or Not to Buy, That Is the Question (for Millennials)

In the last month, the South Florida Business Journal reported on the announcement of at least three new apartment projects:

  • June 18: Developers plan 300 apartments in Midtown Miami
  • June 19: Lennar plans 229 apartments in Boca Raton after $7.5M purchase
  • June 23: Broward commissioners to vote on 400-apartment project

Data from the real estate analytics firm REIS indicate that 2,425 new apartment units were completed in Miami in 2013. Not only is this noteworthy because this represents the most units delivered per year since 1991 but also because nearly all of the units were absorbed. More than 600 units have been delivered so far in 2014, and close to 3,000 units remain under construction. Despite this comeback in Miami apartment construction, the apartment vacancy rate ended the first quarter at 3.8 percent and is expected to remain at this low level for an extended period. Is apartment construction heating up in South Florida as a result of a change in fundamental beliefs of the rising generation?

According to an article featured in the latest issue of the Atlanta Fed's EconSouth, the generation known as the millennials is showing signs of veering from established patterns, particularly when it comes to milestones like moving out of the parents' house, getting married, and buying a home. Many experts, including Atlanta Fed economist Tim Dunne (who has written extensively on the topic, including this article), acknowledge that economic conditions are partly to blame for these delayed decisions.

But are these decisions only being delayed, or have preferences changed? Reports from some Atlanta Fed business contacts suggest that attitudes and preferences may in fact be changing. Some business contacts report that, unlike previous generations, millennial employees are often unwilling to commit long term to one organization, preferring instead nonmonetary perks such as flex time over higher pay, and they place great value on work-life balance. Moreover, real estate business contacts in South Florida have noted that millennials prefer the "experience" that often comes with high-end apartments, such as amenities including dining and shopping, rather than a traditional home in a suburban setting.

More than shifting preferences may be at work, though. According to Fannie Mae’s national housing survey, conducted in May 2014, potential first-time homebuyers are facing several challenges that inhibit their ability to purchase a home. Although the survey does confirm that the number of renters has increased on a national basis, and the number of homeowners has declined, since the financial crisis, the survey's findings indicate that potential homebuyers are not renting by choice but rather by necessity. Higher credit standards and increasing home prices have hindered potential homebuyers. The survey results suggest that younger renters aspire to own but feel pessimistic about their ability to get a mortgage, perceiving down payment and credit score requirements as obstacles. The survey also reported that young renters aspire to own for financial and lifestyle reasons, although a smaller share of respondents (versus last year) reported that their primary reason for renting is to prepare them for homeownership.

For the rental market, the question remains whether that segment's growth is a permanent shift by millennials or merely a bridge until this generation is better prepared to become homeowners.

By Marycela Diaz-Unzalu, a Regional Economic Information Network analyst in the Atlanta Fed's Miami Branch

July 1, 2014

Southeast Housing Update: Home Prices Increasing, If Only Slightly

To detect emerging real estate trends prior to the release of the official statistics, the Atlanta Fed conducts a monthly poll of Southeast broker and builder business contacts. The latest poll results came in a few weeks ago and revealed the following:

  • More builders, but fewer brokers, indicated that home sales had increased from the year-earlier level. Contacts were much less optimistic about future sales growth than they were a year earlier.
  • Fewer brokers, but more builders, noted that inventory levels were down from the year-earlier level.
  • Most brokers and builders continued to report that home prices increased slightly in May compared to year-ago levels.
  • Fewer builders reported an increase in construction activity from month-earlier and year-earlier reports, but their outlooks remained optimistic and largely unchanged from the year-earlier level.

To view the latest poll results in more detail, please visit the Atlanta Fed's Construction and Real Estate Survey page.

Thoughts on credit availability
After more than a year of periodically posing questions about mortgage and construction and development finance, we decided to include the credit questions on a monthly basis starting in January 2014. In the latest poll, roughly two-thirds of brokers and builders reported that the amount of available mortgage finance was either equal to or greater than the amount of demand this month (see the charts).

Housing_update

Most builders, on the other hand, continued to report that the amount of available construction and development finance fell short of demand (see the chart). Because we didn't start asking this question until 2012 (and, again, at that point only intermittently), it is hard to say how this perception compares to how conditions were viewed before the housing downturn.

Builders

In an attempt to put things in perspective, we posed a special question in June to builders asking them how the availability of construction and development finance now compares with the availability four, six, eight, and 10 years ago. Most builders reported that construction and development finance is more available now than it was four years ago in 2010. The results for 2008 were somewhat mixed. Builders were almost unanimous in reporting that construction and development finance is less available now than it was in 2004 and 2006 (see the chart).

Availability_construction

Note: The latest poll results are based on responses from 38 residential brokers and 19 homebuilders and were collected June 2–11, 2014. If you would like to participate in this poll, please sign up.

Photo of Jessica DillBy Jessica Dill, senior economic research analyst in the Atlanta Fed's research department