New York, N.Y. – December 18, 2008–At a seasonally adjusted annual rate of $454.5 billion, new construction starts in November fell 3% from the previous month, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies.  Residential building retreated further, as the lengthy downturn for single family housing continues.  Nonresidential building lost additional momentum in November, while the nonbuilding construction sector (public works and electric utilities) registered a small gain.  Through the first eleven months of 2008, total construction on an unadjusted basis was reported at $509.9 billion, down 16% from the same period a year ago.  If residential building is excluded, new construction starts for the January-November period of 2008 were up a slight 1% over last year.

The November statistics produced a reading of 96 for the Dodge Index (2000=100), down from October’s revised 99 and the lowest level so far in 2008.  “The pattern of construction activity continues to be shaped by the extended weakness for single family housing, which has not yet shown that it’s close to reaching bottom,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction.  “The steep correction for housing has been underway for three straight years now, and a fourth year of decline is anticipated for 2009.  The current year has also seen emerging weakness for nonresidential building, which is expected to broaden in scope during 2009 given tight credit conditions and the tough economic climate.  Public works has seen some erosion in the volume of construction starts during 2008, but the nonbuilding total has also been lifted by a surge of new power plants.  The prospects for nonbuilding construction going into 2009 would appear to be the brightest of the three major sectors, given the potential boost to public works coming from the stimulus package that’s likely to be enacted in late January or February.”

Residential building in November dropped 9% to $131.1 billion (annual rate).  Single family housing had an especially weak month, falling 10%, and has now shown decreased activity in ten out of the first eleven months of 2008.  Declines for single family housing were present in all five major regions, with the Northeast and West each down 14%, the South Atlantic down 12%, the Midwest down 11%, and the South Central down 3%.  Multifamily housing in November dropped 5%, maintaining the broad downward trend that has been present over the course of 2008.  There were a few large multifamily projects reported as construction starts in November, such as a $130 million college-related housing development in the Bronx NY, but in general the amount of large multifamily projects has fallen substantially this year.

For the first eleven months of 2008, residential building was down 39% in dollar volume, reflecting the 39% year-to-date slide for single family housing.  The regional breakdown for single family housing was the following – the West, down 47%; the South Atlantic, down 41%; the Midwest, down 38%; the South Central, down 32%; and the Northeast, down 28%.  For multifamily housing, the year-to-date decline was a similar 38%, as the result of this regional breakdown – the Midwest, down 54%; the West, down 45%; the South Atlantic, down 41%; the South Central, down 24%; and the Northeast, down 19%.

Nonresidential building, at $203.0 billion (annual rate), slipped 2% in November.  The commercial sector was mixed, with steep reductions for warehouses (down 27%) and offices (down 32%), but also increases for hotels (up 6%) and stores (up 20%) relative to a very weak October for both structure types.  The manufacturing building category showed strong expansion in November, jumping 65%, with the lift provided by the start of a $310 million ethanol plant in Pennsylvania, a $300 million hydrogen plant in California, and a $161 million bio-energy plant in Virginia.

On the institutional side, the educational building category in November posted a 7% gain, helped by the start of two large medical research facilities located in California ($200 million) and Texas ($103 million).  The volume of high school construction in November stayed strong, including such projects as a $71 million high school in Illinois.  The healthcare facilities category in November settled back 7%, but the month continued to see large hospital projects reach groundbreaking, with six projects in excess of $100 million located in Arizona ($380 million), Illinois ($265 million), Ohio ($243 million), California ($200 million), Wisconsin ($136 million), and Texas ($101 million).  The public buildings category in November jumped 50%, aided by the start of a $100 million post office renovation in Philadelphia PA.  November also included 12% improvement for church construction from a weak October, but also declines for amusement-related projects (down 5%) and transportation terminals (down 11%).

Through the first eleven months of 2008, nonresidential building in dollar terms was essentially steady with 2007. At the same time, there was a varied pattern for the sectors within nonresidential building. Commercial building during the January-November period fell 17% from last year, with especially large declines for stores (down 27%) and warehouses (down 29%).  While retail construction has seen the sharpest reductions so far in 2008, a more moderate loss of momentum was reported for offices (down 6%) and hotels (down 7%).  The manufacturing building category in the January-November period surged 56% in dollar terms, reflecting the start of four massive oil refinery expansions as well as continued strength for ethanol plants.  The institutional building sector in the January-November period grew 6%, helped by further growth for educational buildings (up 6%) and healthcare facilities (up 16%).  Of the smaller institutional structure types, growth was reported for public buildings (up 6%), while weaker activity was shown by amusement-related projects (down 2%), transportation terminals (down 5%), and churches (down 10%).

Nonbuilding construction in November improved 1% to $120.4 billion (annual rate).  Highways and bridges showed expansion, rising 10% and 6%, respectively, and water supply systems grew 8%.  The river/harbor development category had a strong November, climbing 31%, helped by a $316 million project related to an upgrade for a combined sewer overflow tunnel in Michigan.  On the negative side, sewer construction in November fell 33% from its elevated October amount, and miscellaneous public works projects (such as site work) retreated 4%.  The electric utility category in November edged up 1%, and included the start of a $775 million electric power plant in Montana.

During the first eleven months of 2008, nonbuilding construction advanced 2% relative to last year.  Much of the upward push came from the heightened volume of electric utility construction, which so far in 2008 has surged 53%.  In contrast, most of the public works categories have settled back in this year’s January-November period.  For transportation work, a slower pace was registered by highways (down 1%) and bridges (down 10%).  For environmental work, reduced activity was shown by sewers (down 4%) and water supply systems (down 5%), although river/harbor development ran counter to this trend with a 14% gain.  The miscellaneous public works category in the January-November period was down 12% from last year.

The 16% shortfall for U.S. total construction starts during the first eleven months of 2008 was the result of a varied pattern across the five major regions, with the most severe declines reported in the West, down 27%; and the South Atlantic, down 25%.  The Midwest witnessed a more moderate reduction, dropping 12%.  Holding close to the prior year’s pace for total construction were the Northeast, down 2%: and the South Central, down 1%.

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NOVEMBER 2008 CONSTRUCTION STARTS

MONTHLY SUMMARY OF CONSTRUCTION STARTS
Prepared by McGraw-Hill Construction Research & Analytics

Monthly Construction Starts
Seasonally Adjusted Annual Rates, In Millions of Dollars

	November 2008 October 2008 % Change  Nonresidential Building $202,981 $206,720 -2  Residential Building 131,145 144,150 -9  Nonbuilding Construction  120,379  119,323 +1  Total Construction $454,505 $470,193 -3

The Dodge Index
(2000=100, Seasonally Adjusted)

November 2008........................................96
October 2008.............................................99



YEAR-TO-DATE CONSTRUCTION STARTS
Unadjusted Totals, In Millions of Dollars

	11 Mos. 2008 11 Mos. 2007 % Change  Nonresidential Building $221,937 $222,111 -0-  Residential Building 154,438 251,150 -39  Nonbuilding Construction 133,524 130,296 +2  Total Construction $509,899 $603,557 -16