The value of an average U.S. home has not had a 1 year price decline based upon quarterly U.S. Government data going back to 1/1/76. The worst performance record for the value of an average U.S. home was a one year price increase of +0.2% over the one year period ending 12/31/90. The median one year period percentage increase in the value of an average U.S. home since 1975 is +5.7% (Source: Office of Federal Housing Enterprise Oversight).
Quietly, 30-year fixed mortgage rates have trended to new highs for 2006, rising two basis points to and at an average 6.39%, according to the national survey of mortgage rates and terms conducted by HSH Associates, Financial Publishers. HSH also noted that the average rate for a five-one HybridARM rose six basis points to close the survey period at 6.04%.
Statistics for other loan terms and types can be found at http://www.hsh.com/stats-index.html.
A light economic calendar this week left markets to focus on the new issuance of the 30-year bond, which returned to the market after a four-year hiatus. The auction of the new debt was well received, especially by foreign central banks. The strong demand for the new bond drove its yield down below that of most other maturities on the yield curve, which is now nearly fully “inverted”.The yield curve has become inverted because there has been tremendous demand for US Treasuries, mostly at the longest end of the curve at a time when inflation pressures are moderate and believed to be manageable
Mortgage rates have now retraced an 18-basis point (.18%) decline which occurred from December 16 through January 20. In the past three weeks, interest rates have climbed back up by 16 of those 18 basis points, and there’s nothing to indicate any halt to the steady creep upward at the moment. At the same time, there doesn’t seem to be much reason for rates to continue to press significantly higher, either, but it wouldn’t take much to get them to multi-year highs from current levels.
The City Council of Rolling Hills Estates on February 14, 2006 tentatively approved a new condominium complex intended to replace the existing car wash adjacent to the Avenue of the Peninsula shopping mall and across from the Public Library on Deep Valley Drive. The project is planned to be a four story 58 unit condominium, with units containing two or three bedrooms with two baths, and ranging in size from 1,377 to 2,648 square feet. The project will also have roof top decks as an additional amenity. The units will be clustered around a central courtyard and will also contain 5,810 square feet of ground floor retail space.
The project approved joins two others that the council had previously approved : Silver Spur Court, an 18-unit condominium complex to be built at the corner of Silver Spur and Crenshaw Boulevard (replacing the former McDonald's restaurant), and Peninsula Villas, a 41 unit condominium complex for seniors 55 and older that will be constructed on what is now a parking lot between two buildings at 901 Deep Valley Drive. Another project, which will be a mix of medical offices, condominiums and ground floor retail, is also in the planning stages, to be located just west of the Post office on Deep Valley Drive.
The project is consistent with the City's vision of an urban village along Deep Valley Drive mixing retail, office, and commercial uses in a pedestrian friendly environment.
How have construction costs risen in the last couple of years?
in 2004, the National CPI increased approx. 2.5% while construction costs increased approx. 10%. In 2005, the National CPI rose 4.9% while Construction costs for single family residences rose at a slightly higher rate, although certain costs of specific construction material products increased substantially. Certain products such as asphalt, paving blocks, concrete, gypsum products and copper have increased at rates ranging from 10% to 19%,
What is driving the recent increasing in construction costs?
The costs of construction labor increased 5% to 10% in 2005.
Energy prices across the board rose 17% in 2005
Bulk Cement rose 11.7% in 2005
Ready-mix concrete increased from $95 to $110 per cubic yard
Reinforcing steel increased from $.75 to $.90 a pound
Although lumber increased approx. 16% during the 12 months ending September 2004, the cost of lumber has actually decreased the last 12 months, and since lumber is a major component of the cost to construct residential housing, this has moderated the cost of constructing a single family residence somewhat recently. Although the overall cost to construct a home in Southern California has increased significantly during the last two years.Increasing demand for such construction products as steel by China and India has led to substantial price increases over the last two years. Cement is costly and in short supply in some regions partly because a stiff anti-dumping duty makes plentiful Mexican cement unavailable and forces suppliers to bid for scarce supplies of cement from Asia and Europe. Interestingly, Hurricane Katrina did not have a material impact on most building supplies, Katrina did interfere with imports of cement and natural rubber, and the hurricane damaged plants that produce gypsum, lumber and plywood. Natural gas prices are currently about 60% higher than a year ago. That affects the cost of a variety of construction plastics that use natural gas as a heat source during production. This affects PVC plastic pipe, in particular. Brick and glass use natural gas for heating and drying during production, and their weight also has led to higher transportation costs due to the fuel price increases. Both these products will probably have higher prices in 2006. Gypsum prices (gypsum is used in drywall wall board) rose more than 10% in each of the past two years as strong demand from single and multi-family production exhausted capacity. More production is expected to come on line in 2006. With increasing production capacity for lumber and plywood expected to come on line in 2006, lumber prices should be flat to 10% lower in 2006 compared to the comparable period in 2005.
How much does it cost to build a home or an office/industrial building now?
The average cost to build a single family residence can range over a considerable amount depending on the custom features, type of construction, etc. An example of this type of fluctuating costs depending on the quality of the work involved can be seen in my page describing home improvements on my website at http://www.maureenmegowan.com ( you can also see the approx. cost of various type of home improvements such as adding a bedroom or bath, a kitchen remodel, etc. ) .. Homes can cost from $200 to over $300 per square foot to construct. The average office shell and core construction costs, before tenant improvements has gone up from approx. $85 to $110 per sq. ft. in the last year. The average tilt-up industrial building has gone from $35 to $55 per sq. ft. The average parking garage has gone from $9,500 to $12,000 a car parking space. The average hospital building has gone up from $300 to $450 per sq. ft. Source: Association of General Contractors
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