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Real Estate & Construction Business Trends Analysis, Business and Industry Trends Analysis

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For our brief video introduction to the Real Estate and Construction industry, see
The real estate and construction sectors, including the many professions and fields associated with them, are among the larger components of the global economy. As of early 2015, the U.S. Bureau of Labor estimated that 6.34 million Americans were employed in the construction industry (up substantially from 5.97 million at the beginning of 2014, but down dramatically from a peak of 7.6 million in 2007). The agency also estimated that 1.5 million Americans were employed in the real estate industry as of early 2014 (this figure is also up from 1.48 million as of the beginning of 2014, and equal to the 1.5 million of 2007).
There was $13.4 trillion in all outstanding mortgage debt in America at year-end 2014, up slightly from $13.2 trillion one year earlier including homes and commercial projects.  (Many houses are being purchased with cash, particularly when the purchaser is an investor. This mortgage total included $9.8 trillion in home mortgages, essentially unchanged from 2013). The total of all mortgages was $14.3 trillion in 2009.
Home prices have rebounded dramatically from the depths of the recent recession, but in many markets they remain below their 2006-07 peaks. However, prices have risen to the point that bargains are hard to come by. More than a few observers are concerned that another housing bubble is developing in the most popular markets.
Meanwhile, real estate had enjoyed a significant boom over the recent past in China, Canada, Australia and a few other select spots. By mid-2015, however, many international real estate markets were off their recent highs, including significant softness in China. Australia was suffering from a slump in coal, iron ore and other commodities, and Canada was suffering from a drop in oil and gas prices. These conditions hurt home prices.
In the U.S., home sales volume has picked up substantially from the dismal years of the 2007-09 housing bust and recession, resulting in rapidly rising prices in many markets and a shortage of available homes in the most desirable neighborhoods. This big turnaround is being fueled by many factors. The most significant may be the continued efforts by the U.S. Federal Reserve to hold interest rates down to incredibly low levels, which significantly reduces the monthly payments of home owners who take out mortgages. Another boost to the market is new household formation by members of Generation Y. The oldest members of this segment were turning 33 years of age by 2015. Many had been living with their parents for much longer than normal, due to the recession. While it is difficult for first time homebuyers to find an affordable home and qualify for a mortgage, Generation Y is boosting the market, both as buyers and as new renters.
An additional factor is the slow but steady decline in the number of foreclosed, bank-owned homes on the market. Massive numbers of them were acquired by investors. A lower supply of bargain-priced foreclosures means higher prices and a stronger market for houses overall. Potential homebuyers are also feeling more comfortable financially, as they have paid down credit card debts over the past few years, and the values of their stock market holdings have risen substantially in the recent past.
Construction of all types, including commercial, has enjoyed a rebound. About $967.2 billion in new American construction was expected to be put into place for 2015, a seasonally adjusted annual rate as of February, according to the U.S. Bureau of the Census. While this is a big improvement from recent years, it is nonetheless down from the 2006 peak of $1.16 trillion.
Home builders in the U.S. are once again enjoying robust sales and profits. Many are challenged in finding enough new lots for future building.
Retail centers in the U.S. were seriously overbuilt during the last boom, through 2007, and there were too many stores trying to sell to too few shoppers. The end result of the glut was that large numbers of retail store chains took bankruptcy during the recession, and many others have either curtailed expansion plans or are opening much smaller stores than in the past. However, by late 2012 and into 2015, shopping center occupancy rates were improving in general. Nonetheless, retail stores are facing dramatic competition from sales made over the Internet. Online commerce is growing at stellar rates while mall traffic and store revenues are generally disappointing. (Malls and shopping centers that cater to wealthier customers have seen better results.)
Apartment house operators are enjoying brisk business in general. For the first quarter of 2015, the vacancy rate at U.S. apartments fell to 4.1%, compared to 4.2% in the fourth quarter of 2014. These extremely low vacancy rates are encouraging the construction of new apartment buildings at a rapid rate.
Private sector (non-governmental), commercial construction put in place in the U.S. was on track to reach about $348.4 billion during 2015 (based on a seasonally-adjusted annual rate as of February). This is up substantially from one year earlier.
Over the long term on a global basis, there will be continuing demand from the health care sector for new or remodeled properties as the percentage of the population over age 65 continues to grow, boosting the need for medical care and assisted living centers. This trend has been accelerated in America by the implementation of the Affordable Care Act. Another growing trend in construction in major economies is to incorporate a higher number of energy conservation technologies in new buildings. This is true in both residential and commercial construction. Several “green” building certification plans are now in place, so that architects and builders may seek to attain certain energy conservation and eco-friendly standards.

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