The macro US construction industry has another 12-24 months of favorable demand conditions and mix before cycle correction and a potential slowdown in structural and financial fundamentals. Fannie Mae and Freddie Mac increased their forecasts for the 2020 construction industry in December 2019, indicating a strong first half of the year with strong consumer spending and existing home sales driving a solid remodel and repair market.
Housing fundamentals remain healthy into 2020, and we continue to build below long-term averages for housing needs. According to the new JCHS projections, the number of US households will grow by 12.2 million between 2018 and 2028, and then 9.6 million between 2028 and 2038. However, typical construction cycle dynamics have changed, creating a long tail of moderate, extended growth in housing.
It will likely take several years, even at a more robust pace, for new construction to address the existing pent-up demand for additional housing, as suggested by a still-increasing share of 25- to 34 year-olds living at home with their parents.
– Fannie Mae, December 2019
More favorable conditions and a renewed focus by builders will allow for continued growth through 2020 with a pause or slight pull back in 2021 before recovering through 2024. Some key factors contributing to continued growth in the housing market are outlined below:
The key to strong performance in housing beyond 2020 is the starter home. Build rates and supply levels have trailed demand in the last several years, providing an opportunity for builders in the market.
For more information on emerging trends in the building and construction industry, download our 2020 Building & Construction Outlook.
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