1. Construction Environment BCN 4772 Summer 2006

2. Residential 2006 National Median price $210,500 Median price $210,500 13.1 % Increase from January 2005 13.1 % Increase from January 2005 Median home price in California in January $551,300 Median home price in California in January $551,300 The median home price in New York in January $319,000 The median home price in New York in January $319,000 Maryland’s median home price in January $290,776 Maryland’s median home price in January $290,776 North Carolina the median home price in January $206,788 North Carolina the median home price in January $206,788

3. Existing Homes Florida The median value for a home in Florida in 2001 was $118,200 The median value for a home in Florida in 2001 was $118,200 $244,200 in February 2006 $244,200 in February 2006 106% increase in the last five years 106% increase in the last five years Miami median home price increased from $309,800 to $368,700 in 2006 Miami median home price increased from $309,800 to $368,700 in 2006 Ft. Lauderdale median home price from $319,400 in 2005 to $360,800 in 2006 Ft. Lauderdale median home price from $319,400 in 2005 to $360,800 in 2006

4. Duval County Affordability index = cost of the home / annual family income (J.C.C.I.) Affordability index = cost of the home / annual family income (J.C.C.I.) Median household income in Jacksonville is $60,287 Median household income in Jacksonville is $60,287 Median home price in Jacksonville is 190,700 Median home price in Jacksonville is 190,700 Median house price / Median household income = 3.16 Median house price / Median household income = 3.16 Target is 2.5 for affordability Target is 2.5 for affordability

5. Duval County Increase of 6% in real-estate transactions in Jacksonville over the last 15 years Increase of 6% in real-estate transactions in Jacksonville over the last 15 years Increased 8% from 2004 to 2005 Increased 8% from 2004 to 2005 Decrease of 1% in existing home sales in February of 2006 Vs February 2005 Decrease of 1% in existing home sales in February of 2006 Vs February 2005 Starting to show a slowing trend Starting to show a slowing trend

6. Trends Facing Jacksonville Market Mortgage Rates have increased from 5.67% to 6.5% from 2005 to 2006 Mortgage Rates have increased from 5.67% to 6.5% from 2005 to 2006 Large amount of investment houses that have been bought over the last few years Large amount of investment houses that have been bought over the last few years Large supply of condos in the Jacksonville market Large supply of condos in the Jacksonville market Sales of existing homes have decreased all over Florida Sales of existing homes have decreased all over Florida

7. New Home Construction Construction and development lending grew 66 percent during 2005. Construction and development lending grew 66 percent during 2005. Most of the lending is for residential homes and condos Most of the lending is for residential homes and condos The housing market accounted for 56% of all construction last year. The housing market accounted for 56% of all construction last year. Sales of new single-family homes rose 13.8 percent last month. Sales of new single-family homes rose 13.8 percent last month. There was a 10.9 percent plunge in sales in February There was a 10.9 percent plunge in sales in February

8. What does it mean? Many home purchasers have been stretching to buy their homes. Many home purchasers have been stretching to buy their homes. Adjustable-rate mortgages (ARMs) to reduce their payments.. Adjustable-rate mortgages (ARMs) to reduce their payments.. ARM’s see mortgage payments increase substantially as interest rates increase. ARM’s see mortgage payments increase substantially as interest rates increase. Foreclosure rates will go up, and home values could be hurt as a result. Foreclosure rates will go up, and home values could be hurt as a result. Real-estate bubble? Real-estate bubble? Correction? Correction? Real-estate Boom? Real-estate Boom?

9. Commercial Construction 8.6% increase in commercial market to 67 billion 8.6% increase in commercial market to 67 billion 6.2% increase in office building market to 35 billion 6.2% increase in office building market to 35 billion 6.7% increase in health care work 6.7% increase in health care work 22% gain in industrial construction 22% gain in industrial construction (fastest growing segment in the industry) 10% decrease in power construction 10% decrease in power construction

10. Commercial Construction Commercial construction spending is at record levels Commercial construction spending is at record levels The biggest categories were projects for use as office space The biggest categories were projects for use as office space Hotel market has seen a rebound in new construction as well Hotel market has seen a rebound in new construction as well Steep rises in both demand and construction costs are fueling the growth. Steep rises in both demand and construction costs are fueling the growth.

11. Construction Costs Prices for iron and steel products rose 35% in 2004 Prices for iron and steel products rose 35% in 2004 Steel rebar and copper wire skyrocketed by as much as 60% in some markets Steel rebar and copper wire skyrocketed by as much as 60% in some markets PVC pipe and other petroleum-derived materials went up between 15% and 20% PVC pipe and other petroleum-derived materials went up between 15% and 20% Steel and cement prices have been especially high as well. Steel and cement prices have been especially high as well.

12. Construction Costs If Costs keep going up, why is there a large growth trend in the construction industry? If Costs keep going up, why is there a large growth trend in the construction industry? Rate of growth of real-estate Rate of growth of real-estate Demand Demand Speculation Speculation State of the economy State of the economy Hurricanes Hurricanes Hurricanes

13. Issues to look at Apartment market Apartment market Rentals Rentals Investment Property Investment Property Rising Mortgage rates Rising Mortgage rates Credit limits Credit limits Baby Boomers Baby Boomers Global demand for construction materials Global demand for construction materials

14. Price Index What is a price index? What is a price index? The cost of a basket of goods expressed as a percentage of the cost of the same basket of goods during a base year. The cost of a basket of goods expressed as a percentage of the cost of the same basket of goods during a base year. CPI, PPI, GDP Deflator CPI, PPI, GDP Deflator BCI, CCI BCI, CCI

15. Price Index Cost of basket today Cost of basket in base year X100 If a light bulb costs.75 now and last year it cost.50 What is PI?.75.50 X100 = 1.5X100 =150

16. What does the PI number mean? If the index for a light bulb is 150 If the index for a light bulb is 150 So in one year the price of a light bulb has gone up by I and 1/2 times or 50% increase So in one year the price of a light bulb has gone up by I and 1/2 times or 50% increase So 1.5 X.50 =.75 So 1.5 X.50 =.75 Base year is always 100 Base year is always 100 100/100 = 1 100/100 = 1

17. BCI

18. BCI

19. CCI

20. CCI

21. Other Building Cost Indexes General-purpose Cost Indexes General-purpose Cost Indexes ENR 20-City Construction Cost ENR 20-City Construction Cost ENR 20-City Building Cost ENR 20-City Building Cost BuRec: General Buildings BuRec: General Buildings Factory Mutual: Industrial Factory Mutual: Industrial Lee Saylor Inc.: Material/Labor Lee Saylor Inc.: Material/Labor Means: Construction Costs Means: Construction Costs Smith Group Smith Group

22. Other Building Cost Indexes Selling Price Indexes-Building Selling Price Indexes-Building Valuation Indexes Valuation Indexes Commerce and BLS Cost Indexes Commerce and BLS Cost Indexes

23. ENR

26. Other Trends Oil prices Oil prices Steel Prices Steel Prices Cement Prices Cement Prices Wages Wages Baby–Boomers Baby–Boomers

27. Good News