The construction forecast for 2018 is positive due to support from such factors as growing GDP and low interest rates.
The construction forecast for 2018 is certainly looking like a positive one, as several upbeat indicators point to a strong economy next year.
Let's start with the GDP (Gross Domestic Product). This number reflects on the nation's economic outlook in general. And that outlook is a bright one.
Starting with the Great Recession in 2008, here's a rundown of the annual GDP.
2008: -.3%
2009: -2.8%
2010: 2.5%
2011: 1.6%
2012: 2.2%
2013: 1.7%
2014: 2.6%
2015: 2.9%
2016: 1.5%
2017: this is when the tide turned. In the second quarter of the year, the GDP took off to 3.1%. For the third quarter, the GDP ticked even higher at 3.2%. After a strong holiday season, the number for the fourth quarter should be very promising.
A strong economy certainly creates an atmosphere for a strong outlook for construction overall.
Here's another factor that will foster growth - mortgage rates. That bodes well for multi-family construction.
According to the Mortgage Bankers Association, here's the outlook for 30-year fixed mortgage rates.
Q1: 4.3%
Q2: 4.5%
Q3: 4.7%
Q4: 4.8% (forecast)
Considering that rates were 3.9% in the third quarter of 2017, that's very encouraging. There are two major factors taking place with this interest rate forecast.
One, rates are still incredibly low, compared to years ago when mortgage rates were as high as 9%. That was certainly a bad environment for multi-family construction.
The second factor to consider is that the MBA economists expect rates to rise. That's due to an economy that is starting to heat up. Those rising rates will also prompt more people to buy condos and multi-family units before rates go even higher.
The MBA predicts the housing starts for units of two or more for 2018 to be:
Q1: 370,000
Q2: 380,000
Q3: 380,000
Q4: 370,000
That's a positive signal, considering that the construction of new housing units of two or more in the third quarter of 2017 were only 319,000.
Construction experts predict growth in most sectors
The Associated General Contractors of America has a positive forecast.
They predict overall construction spending will increase 2% to 7%.
According to experts at Oldcastle Building Solutions, they predict a 5% increase in total US construction. You can download their detailed report here.
Their economists break it down this way:
Commercial: 2%
Industrial: 4%
Education: 6%
Healthcare: 5%
Public Building: 6%
Multi-family: minus -1%
Single-family: 9%
Naturally, different regions of the country will do better than others. This is what Oldcastle forecasts by region:
Northeast: 3%
South: 6%
Midwest: 4%
West: 5%
Here's another indicator. According to the AGC, between November of 2016 and November of 2017, some 40 states added construction jobs.
"There were robust construction gains in most parts of the country as the economy continues to expand," said Stephen E. Sandherr, chief executive officer for the association. "Demand should continue to grow as newly enacted tax cuts and regulatory reforms stimulate even more widespread economic growth."
The top five states adding jobs were:
California: 48,400 - 6.2% increase
Florida: 41,800 - 8.7% increase
Texas: 23,900 - 3.4% increase
New York: 12,600 - 3.4% increase
Pennsylvania: 12,000 - 4.6% increase
"This is one of the best business climates many firms have experienced in over a decade. While Washington needs to address infrastructure funding, workforce shortages and multi-employer retirement reforms, 2018 looks to be a strong year for the industry."
Dodge Data and Analytics made their prediction for 2018, and they forecast a 3% increase in total construction nationwide - generating $765 billion.
https://www.ecmag.com/section/your-business/2018-dodge-new-construction-outlook-predicts-3-percent-increase
They forecast:
Single-family housing: 9% increase
Multi-family housing: minus - 8%
Educational facilities: 11%
Commercial: 2%
There are also some promising developments taking place around the country. Take stadiums for example. The recently-moved Las Vegas Raiders will build at $1.9 billion stadium. Not to be outdone, the Los Angele Rams and the Los Angeles Chargers will start construction on their $2 billion-plus home in Southern California.
Then there is continued talk about federal spending on improving and repairing infrastructure in the US. President Trump has thrown around the $1 trillion figure which would certainly have a positive impact on the construction industry for several years.
All in all, the forecast is favorable with little chance of negativity. That's certainly encouraging to everyone in the construction industry and the vast number of businesses that depend on that industry.
It's a Happy New Year Indeed!
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