Environmental Scanning IntroductionIn the following pages, discussion of the construction industry will take place, including a clear description of the industry and the business environment problem. This document will be divided into several parts starting from the introduction. The next key macroeconomic variables influencing the construction sector will be identified. The macroeconomic variables and the corresponding sector variables relating to the last five years will be represented graphically. The information will be integrated from the text and from external sources to illustrate the effects of economic variables on the construction sector. The paper will conclude with a look at the challenges and opportunities that exist for construction companies in the operating environment. Industry Overview This document will focus on the construction industry, NAICS code 236115 - New Construction of Single-Family Housing (Except Operating Builders). This U.S. industry includes general contracting firms primarily responsible for the construction of all new single-family dwellings, such as detached single-family homes and townhouses or townhouses in which each dwelling unit (1) is separated from its neighbors by a ground-to-ground connection . -roof wall and (2) has no residential units built above or below. This industry includes general contractors responsible for on-site assembly of modular and prefabricated homes. Included in this industry are single-family housing design-build firms and single-family construction management firms that act as general contractors. (NAICS, 2008) Business Environment Problem Description Housing starts are one of the most followed measures of construction activity. From 2002 to 2005, the housing sector was stimulated by some of the lowest mortgage rates in recent times, leading to a sharp increase in new housing projects, which reached 2.1 million units in 2005. Low mortgage rates have also inflated home prices, which have seen a doubling in 12-month increases since mid-2004. Since 2006, however, the housing market has cooled significantly, with a sharp decline in home sales and a slowdown of house price inflation. In addition to the sharp decline in new construction, the construction industry is also having to clear a backlog of unsold homes. The growing number of foreclosures will also have an impact on house prices, which so far have simply stabilized or fallen slightly. Finally, as liquidity in the subprime mortgage market dries up – due to tighter lending standards and growing risk aversion among more traditional lenders – demand for housing will decline considerably in 2007. Repurchases will add also to the stock of unsold homes that builders are trying to get. work.