New construction

After a strong start in the beginning of 2000, new construction fell slightly at mid-year. Contracting for new construction slipped 3 percent from June to July 2000, according to the F.W. Dodge Division of The McGraw-Hill Companies. The Dodge Division reports that this trend is likely to continue as the third quarter of the year is expected to see a decline in new construction. These figures are significant because new construction is a key force driving the landscape-construction industry.

A reduction in new housing starts has contributed to an overall decline. Residential building dropped for 4 months leading up to July, according to the Dodge Division. One reason may be higher mortgage rates. However, the Dodge Division speculates that the decline in new housing may ease as the 30-year fixed mortgage rate has edged down from a peak of 8.6 percent in May to 8.1 percent in July.

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Residential building construction wasn't the only category to decline. Nonresidential construction also fell after a strong June, according to the Dodge Division. The group reports that nonresidential building dropped 8 percent in July to $150.6 billion (see table below). The nonresidential category includes office buildings, which declined 19 percent, and healthcare facilities, which dropped 25 percent.

While these statistics show only 1 month's changes, the Dodge Index provides a more comprehensive look at the changes in construction month by month. The index, shown in the graph below, shows the value of construction contracts by using the year 1992 as a baseline with a value of 100. For example, June had a reading of 172 in July and 178 in June. Around the same time last year, the index was just over 180.

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