New Construction Data Indicate Stagnation in Economic Recovery, Says Covendium

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The most recent numbers on new home and commercial construction show slowing in both sectors, weighing down an already sluggish recovery. Covendium says in order to kick start the economy, steps must be taken to increase new building.

We need to take steps to make it easier for residential and commercial builders to get access to liquidity

New home construction was down 5% in August, according to a new report by the Department of Commerce. The data indicate full economic recovery is still out of reach, as new home construction has historically been an important factor in post-recession economic growth. The commercial sector is also lagging—the newest Dodge Index report indicates nonresidential construction starts fell 6% from June to July. Covendium, the nation’s largest debtor-side commercial debt restructuring and advisory firm, says the economy cannot fully recover without a significant jump in new construction rates.

“The construction industry is hugely important to the health of the American economy, creating jobs and adding tax revenue. But many construction companies are stuck in a hard situation, with building values down and lenders unwilling to extend credit,” notes Jonathan Gorman, Managing Director of Consulting Services for Covendium. “We need to take steps to make it easier for residential and commercial builders to get access to liquidity so they can build up the economy.”

New home sales have a significant economic impact, despite being a small part of the total residential market. Historically, the housing market has contributed at least 15% of economic growth after recessions, but it has only added 4% since the official end of the recession in June 2009. The National Association of Home Builders estimates that, on average, each new home built creates three jobs for a year and generates around $90,000 in taxes.

“Considering the unemployment and national debt issues we face, improving new construction rates could significantly help other sectors of the economy,” explains Gorman.

McGraw-Hill Construction, the producer of the Dodge Index, says trends in new building starts indicate ‘bouncing along the bottom’; not moving too far up or down from the lows reached in 2008-2009. Robert A. Murray, vice president of economic affairs, stated, “While the commercial categories seem to have bottomed out, the concern about a weakening U.S. economy will likely delay any improvement for these project types in the near term.”

Covendium says stabilizing the economy will be crucial to creating the market confidence needed to make creditors willing to lend again. According to Gorman, “Policies need to be in place to encourage lenders to extend more credit, so the commercial building and housing markets can make a real recovery.”

For more information about new construction trends, or for information about any of Covendium’s products or services, call them at (407) 284-4000, or view them on the web at http://www.covendium.com.

About Covendium
Covendium specializes in comprehensive commercial debt resolution, restructuring and business consulting for clients whose financial model has been compromised by the economic downturn and the bank liquidity crisis.

For some clients, all they need is an experienced negotiator to provide their lender with the reality of the financial situation and the tool-set to restructure their obligations. For other clients, Covendium provides business consulting and access to non-bank funding sources.

Their team of professional advisors has successfully restructured billions in transactions, with dozens of banking institutions (including major national, regional and community banks) and over 30 separate non-bank financial counterparties.

Bad things happen to good people. Covendium is a premier national debt resolution firm that helps their clients with everything from commercial foreclosure to debt management to commercial debt restructuring to private debt placement.

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Jonathan Gorman
Covendium
(407) 284-4380
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