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ABI Rebounds in September
A Return to Positive Territory

The Architecture Billings Index dipped slightly below its benchmark level of 50 in August, but rallied in September to a reading of 53.7, the American Institute of Architects said.

After hitting a bump in the road in August, the Architecture Billings Index rebounded in September to a level above its benchmark of 50.

The American Institute of Architects considers ABI readings of 50 or higher as "positive territory." The ABI has been above 50 in six of the nine months in 2015, the AIA said.

September's ABI score was 53.7, up from 49.1 in August. This score reflects a hike in design services, the AIA said, as readings above 50 point to an increase in billings. The AIA's new projects inquiry index was at 61.0, down from 61.8 in August.

Each ABI is an economic indicator of construction activity. It reflects the approximate lead-time of nine to 12 months that typically passes between architecture billings and construction spending.

"Aside from uneven demand for design services in the Northeast, all regions are in good shape, " Kermit Baker, and AIA's chief economist, said.

"Areas of concern are shifting to supply issues for the industry, " Baker said, "including volatility in building materials costs, a lack of a deep enough talent pool to keep up with demand, as well as a lack of contractors to execute design work. "

Key September ABI highlights:
o Regional averages: Midwest, 54.2; Northeast, 43.7; South, 54.5; West, 51.7.
o Sector index breakdown: mixed practice, 52.6; institutional, 51.5; commercial-industrial, 50.9; multi-family residential, 49.5.
o Project inquiries index: 61.0
o Design contracts index: 53.2

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The third-quarter Remodeling Market Index, an assessment of the overall market conditions of the home remodeling industry, dropped two points to 57.

On a positive note, the National Association of Home Builders said the RMI has remained above its benchmark level of 50 for 10 straight quarters.

An RMI above 50 indicates more remodeling firms are reporting higher market activity, compared to the previous quarter. Conversely, scores below 50 would point to lower market activity.

"An RMI above 50 indicates that remodelers still feel positive about the market on balance, and it is an indication of the housing recovery that this quarter's RMI reading is the tenth straight quarter in positive territory, " David Crowe, chief economist for the NAHB, said.

Each RMI addresses current home remodeling conditions and future remodeling activity, the NAHB said. The RMI's current market conditions index declined three points to 56 in the third quarter, while its future market conditions index, at 58, was unchanged.

By region, RMI scores were: 58 in the Midwest; 64 in the Northeast; 56 in the South; and 61 in the West. "The sustained confidence of remodelers shows that the remodeling market is gradually strengthening in what has been a longer than anticipated recovery, " Robert Criner, NAHB remodelers chair, said. "Smaller jobs remain more popular, but overall, remodelers feel positive about the future of the industry. "

More than one million new homes will be built in 2016, and production will reach 1.2 million units in 2017, the National Association of Realtors said in its Fall Construction Forecast webinar.

Robert Denk, the NAHB's senior economist, said: " 2016 has a lot of potential to accelerate the recovery. It's about population and job growth. We're really in a very different place than we were in the early rounds of the recovery. "

The long-term average is 1.3 million single-family home starts per year. But during the housing crisis of a few years ago, starts dipped to about 350,000 in 2009. The market has slowly been recovering and is currently at about 740,000 units, or 53 percent of the long-term average, according to Denk.

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July 17, 2019, 8:30 pm PDT

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