The multifamily housing market continued its strong performance in the American Institute of Architects’ (AIA) Architecture Billings Index, a leading economic indicator of future construction activity that is based on the billings from the nation’s architectural firms.
For January, the multifamily housing segment of the Architecture Billings Index was 54.5; any number over 50 indicates an increase in billings from offices.
Architecture Billings Index – Strongest Since 2007
Beyond multifamily housing, the other aspects of the Architecture Billings Index were similarly strong, posting their strongest numbers in more than five years:
- The overal Architecture Billings Index score was 54.2 for January, a marked increase from the 51.2 in December that is the strongest monthly growth for the index since November 2007; any part of the index that is greater than 50 represents an increase in billings for the nation’s architecture firms.
- Similarly, the new projects inquiry index, which measures new developments, rose substantially, increasing from 57.9 in December to 63.2 in January.
- In addition to multifamily’s strong performance, every other area of the Architecture Billings Index was positive in January: the mixed practice index was 54.9, the commercial/industrial index was 52.0 and the institutional index was 50.2.
- Regionally, the situation was also quite positive, with the Midwest leading the way with a 54.4 reading, followed by the West (53.4), South (51.7) and Northeast (50.3).
U.S. Construction – Still Inhibited by Lending Standards?
Kermit Baker, the AIA’s chief economist, spoke highly of the Architecture Billings Index’s strong performance, yet he referenced to one of the defining mantras of the housing recovery – restrictive lending standards.
“We have been pointing in this direction for the last several months, but this is the strongest indication that there will be an upturn in construction activity in the coming months,” Baker said. “But as we continue to hear about overall improving economic conditions and that there are more inquiries for new design projects in the marketplace, a continued reservation by lending institutions to supply financing for construction projects is preventing a more widespread recovery in the industry.”
One other point worth mentioning: the construction projects that make up the Architecture Billings Index typically do not break ground for another nine to 12 months, so the strong readings on multifamily housing are all but guaranteeing future growth in multifamily construction into 2014, which should make for a very interesting housing market!