With end of the year data rolling in and consumer confidence reaching a high note, forecasters are starting to predict just how the construction industry and the national real estate markets are likely to perform in 2018.
In 2017 housing starts have seen overall growth, boosted in the latter part of the year by post-hurricane rebuilding efforts. Through the first part of 2017, construction spending increased by 4.3%, indicating that the industry is healthy and steady. According to NASDAQ, homebuilder’s confidence hit an 8-month high in November.
The Federal Home Loan Mortgage Corporation’s (Freddie Mac) September Outlook report predicts that the construction of new homes will be the primary driver of an increase in real estate activity. In 2018 1.33 million housing starts have been forecasted. This would be a rise from the 1.22 million housing starts in 2017.
One of the factors holding back the housing market in the US is the growing trend of millennials avoiding traditional single-family housing. The generation of young adults who grew up during the housing market collapse of the late 2000’s has shown a reluctance to embrace the typical mortgage, opting instead to rent in urban areas which many consider more convenient and socially attractive. But some economists predict that as this generation settles down and starts families they will migrate towards traditional housing, creating a market boom.
Rising Costs of Labor and Material
Things are not all rosy in the construction industry. Rising costs of labor and material is making it a little harder every year to come in under budget. Material costs are rising due to the combined effects of many different factors including inflation, increases in wholesale prices and rising costs of transportation.
Labor costs are also going up, mostly because of the limited labor force. After the recession workers fled the construction industry at an astonishing rate, and the industry still hasn’t fully recovered. The lack of laborers forces contractors to offer higher, more competitive wages in order to coax workers from other sectors in the job market.
Overall, based on many predictable factors residential construction looks to remain constant and steady over the course of the next year, which is great news for home-builders and contractors.