Housing Market Stirs - More Hammers Swinging

It's a tough call, trying to pinpoint the precise time our industry recovers from the most serious economic malaise since World War II, but there are increasing signs of life from the sectors we serve.

Toll Brothers Inc.'s stock jumped Wednesday after the luxury homebuilder posted its first annual increase in signed contracts in four years.

New home contracts rose 3 percent from the third fiscal quarter last year, and the number was up a surprising 44 percent from the second fiscal quarter this year. Toll told the Associated Press that demand was so robust the company has been able to scale back the incentives it offered to get buyers in the door.

Toll sold 792 homes, generating $461.3 million in revenue for the three months ended July 31. Revenue was down 42 percent from the same period last year because home prices have declined and Toll has fewer communities around the country.

"Although some of our markets are still stuck in the mud, many are improving," Robert Toll, the company's chairman and CEO, said in a statement.

Other major builders - including D.R. Horton Inc., Pulte Homes Inc. and Centex Corp. - all recently reported better earnings for the first half of the year.

Update on Construction Outlook

McGraw Hill published its Spring 2009 Construction Outlook publication and here are some of the significant highlights of the of the report.

The American Recovery and Reinvestment Act includes a $787 billion stimulus of which approximately $130 billion will go to construction from 2009-2011. The bulk of construction related stimulus money is going to GSA and the DOT.

GSA Activity:

• 70% of the GSA work will be in Washington DC with the majority of the remaining 30% going to projects in the larger states such as California and DC.
• These projects will likely not start any time soon; the GSA needs to obligate $5 billion by mid-2010 and the remaining amount by mid-2011.
• There are numerous rules and regulations that will go along with these projects; many of which may cause many of your customers to opt out of bidding.

DOT Activity:

• There is immediate work with half of the funding required to be designated by June 30, 2009 and the remaining half by March 2010.
• Current breakdown of funds is $27.5 billion for highways, $8.4 billion for transit, $9.3 billion for rail ($1.3 billion for Amtrak; $8 billion for high speed rail) and $1 billion to TSA.
• This funding is “use it or lose it” which means it will not be wasted by the states stimulus plan eliminates the standard state fund matching requirement.
• For roads, this is 20% of the total project cost; again supporting that these funds will not be wasted..

"Shaun's Corner" - What's That Light I See?

By Shaun Meany
The PEiR Group

Thanks for all your calls and email these last few weeks. Your feedback, ideas, and good humor are essential to my getting a handle on our industry's mood and overall perception of market conditions.

I'm not here to be a cheerleader. That's not my role. I'm here to help our members get through this downturn in any way I can, and to share any insight I may have that indicates light at the end of the tunnel.

While some may wryly say the only light they see in the tunnel is on the front of the train running straight at them, there are indicators of a turnaround - certainly not tomorrow, or the next day - but coming. And we all need to be prepared to catch the wind when it starts to blow our way again.

Why so optimistic, you ask? Well, I'm hearing that while public construction projects are in a holding pattern, private jobs are still buzzing in certain sectors, and there has been some shift in attention given to non-AEC work by our members.

I'm not going to lie, we're in for a bumpy ride. But if we "Manage for Success" and make the right moves, I believe we can come out of this economic malaise stronger and with more opportunity ahead for all of us.

The target areas that reprographers need to focus on are federal government agencies like DOT, Harbors, Navy, Marine, Army and Air Force, US Army Corp of Engineers and prisons. Call on state and local agencies like building departments, DOT, Public Works and Schools, prisons - there are projects there and jobs to be had.

Private sector institutions, hospitals and stadiums, energy alternatives (wind, solar and other) are also weathering the current storm.

I believe the stimulus package will include two key components that should help the AEC market; significant infrastructure funding increases and beneficial changes in the tax code to promote more business investment. The transportation sector will be a major beneficiary, along with significant investments in water, energy and school and other public construction projects.

A recession is often a stimulus for the adoption of new technologies which means our AEC customers will be looking to deploy technologies that allow them to re-invent their inefficient processes. One process that is sure to be retooled is the bid process.

This is not the time to sit back and wait for the marketplace to reignite itself. Reprographers need to be out in front of their customers discussing their technologies and explaining that this is a perfect time for their customers to invest time in learning these new systems. So when the market does catch fire again these new systems can be used to increase productivity and - by extension - revenues for the reprographics industry.

And The PEiR Group will be here to help in any way we can. Good times or bad, just pick up the phone or drop an entry into this blog. We answer every call or email we get and we look forward to hearing from you.

We're going to get through this. And we look forward to seeing as many of you as can make it to Las Vegas on March 5th.

We'll have some fun and get down to business,

Regards,

Shaun