May
28
2014

Q1 Special Report: Construction Endures Cold Start – Optimism Remains High

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Today Experian Business Information Services released a special report on the construction industry, detailing a weather-related slow start to the New Year in cities east of the Rockies, and a generally positive picture out west. From New England to the Deep South, the infamous Polar Vortex sent super-frigid Canadian air careening toward the Gulf for weeks at a time, putting the deep freeze on real-estate sales and all associated construction activity. Fortunately, activity west of the Rockies helped balance this deficit to a degree, and late 2014 warming trends, both meteorological and economic, lead us to look optimistically toward the rest of 2014.

Key Credit Performance Highlights

Springfield, MA, Providence-Fall River-Warwick RI-MA and Worcester MA-CT had top credit risk scores – an indication of strong post-Hurricane Sandy rebuilding, while Miami, FL, Fort Lauderdale, FL and Orlando, FL remain at the bottom. Demand is still lagging, and credit risks reflect these areas’ inability to soak up existing inventories.

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Source: Experian Business Information Map

Nassau-Suffolk, NY, New York, NY and Miami, FL maintain the lowest bankruptcy rates while Sacramento, CA, Bakersfield, CA and Vallejo, CA remain at the bottom. As one might suspect based on credit risk patterns, bankruptcy rates in New England and the upper Mid-Atlantic States were quite low in Q1 2014. So, how do you explain overbuilt Miami’s position in the number three spot? The answer: The construction industry’s situation there is so dire that banks simply can’t afford to foreclose. They have no one to sell to, so they do what they can to work with distressed companies to keep them alive.

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Source: Experian Business Information Map

Houston, TX, Salt Lake City, UT and Columbus, OH maintained low delinquency rates, while Fort Myers, FL, Tacoma WA and Cincinnati OH remain in the bottom three. For several years now, Texas has emerged as one of the country’s most stable markets. Builders there managed to avoid overproduction in the last decade, and as a result, construction in the Lone Star state continues to move along at a slow, steady pace. The real curiosity here is Columbus, Ohio, which is near the top of non-delinquent cities, while nearby Cincinnati, Ohio, is just about at the bottom. The two big Ohio markets are an hour’s drive from each other yet their construction numbers couldn’t be less similar. We have no clear explanation for this phenomenon.

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Source: Experian Business Information Map

Omaha NE, Grand Rapids, MI and Milwaukee, WI emerge as the top three metros in construction for fewest number of days beyond terms bill payment. At the bottom of the list, we again find our “usual suspects”: major Florida cities along with Las Vegas, NV. None of this is a surprise, with these markets in bad shape across all economic sectors.

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Source: Experian Business Information Map

Looking Ahead

Employment in construction increased by 32,000 jobs in April, bringing the current six-month net change to 136,000 jobs. Since reaching an employment trough in January 2011, the industry has recovered 568,000 jobs, or 24.8 percent of the jobs lost during the recent employment downturn.

American’s overall state-of-mind is moving back into positive territory, according to the University of Michigan Consumer Confidence Index. With the housing and stock markets on the rise, we look forward to more job growth, household formation and overall business activity across most industries.

Read the full report:

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