Residential construction waking up from slumber

In April 2013 there were 148 (SA) building permits issued for new private housing units in the Allentown-Bethlehem-Easton MSA, which includes Warren, Carbon, Lehigh and Northampton counties. Raising the total number of permits issued in the last 12 months to 1,328. This is 17.5% higher than last April’s level, which is not a huge increase but a positive move in the right direction, keeping in mind that in March 2006 that number was 4,798. permits
Housing starts also followed a similar pattern in the region, it dropped from a high of 4,470 annual starts in 2006, to a low of 942 starts in 2012. This number has improved to 1,065 as of April 2013, an increase of 14.9%.

The drop in construction correlates directly with the 42% drop in employment in construction industry between 2005 and 2010. Local construction employment has shown a slight improvement since 2010. While total employment in the region has already exceeded its pre-recessionary level, we are nowhere near recapturing the previous peak employment level in construction. Clearly, construction employment significantly lags the rest of the region.

When all transactions are considered, housing price index has dropped 20% in the ABE MSA from the peak of the housing market, according to the Federal Housing Authority (FHA). The FHA’s price index includes all transactions based on sales price and appraisal data. While housing sales prices in Lehigh and Northampton counties are showing some improvement, the increases are relatively tamed.

Construction employment in the region will continue to improve for the balance of this year with the expectation that it will accelerate in 2014. Reaching the peak level of 2005, realistically, doesn’t appear to be in the cards any time soon.