Industry Indicators Point to Growth in 2012

Changing market conditions and expanding demographics are prompting a positive outlook for construction and housing through 2012.

Analysts and industry insiders are painting a rosy picture for the housing and construction industries throughout 2012 and beyond, despite a struggling housing market and continuing high unemployment.

JP Morgan CEO Jamie Dimon was optimistic in his annual letter to investors, citing multiple indicators that conditions are turning around, and will continue to improve if trends stay on course.

Dimon?EUR??,,????'???s outlook considers various demographic and market factors, beginning with the roughly 12 million people added to the U.S. population since the housing crisis began four years ago. That growth rate would typically require 1.2 million additional housing units, but demand has only reflected about half that number. Improving perceptions are expected to eventually bring the other half into the marketplace.

Other gauges include a surplus of housing ?EUR??,,????'??? 845,000 housing units have been created annually over the last four years, and only 250,000 per year have been destroyed by attrition and demolition ?EUR??,,????'??? and easing mortgage lending standards, according to Federal Reserve surveys of loan officers.

Dimon also cites the falling supply of existing single-family homes and condos ?EUR??,,????'??? from 4.4 million in 2007 to 2.7 million today ?EUR??,,????'??? as good for the market, coupled with an uptick in renting costs throughout the country, making it cheaper to buy a home than rent for the first time in more than 15 years.

Ken Simonson, chief economist for the Associated General Contractors of America, a national trade group, presented similar findings to a group of master builders in Pennsylvania last week.

In addition to market conditions, Simonson noted a number of recent events that are bringing manufacturing operations back to the United States. Disruptions to the supply chain like the volcano eruption in Iceland that grounded transatlantic flights in 2010, earthquakes and tsunamis ravaging Japan in 2011, and major flooding in Thailand are motivating American businesses to repatriate their resources. The widening of the Panama Canal, expected to finish in 2014, will also bring new economic opportunity to the East coast.

Despite unemployment levels in the construction industry remaining above 10 percent, and the lag in both public and private construction sectors, Simonson predicts ?EUR??,,????'??this year, for the first time in five years, construction spending should be up anywhere from five to 15 percent.?EUR??,,????'??

?EUR??,,????'??This has nowhere to go but up,?EUR??,,????'?? Simonson said.