Construction, Construction Everywhere!
And Why It Will Impact Us Even More
If you own a house or condo, or are buying your first home, the odds are pretty good that you will begin a renovation project in the next eighteen months.
Two-thirds of young homeowners surveyed by Bank of America in 2021 expect to start a renovation within the next year.
Why the boom in construction?
The factors limiting the growth of home building over the past few years have been strong, but those spurring on new growth are now proving far stronger.
Factors Slowing Growth
- The US population growth rate has slowed in the last few years.
- For the first time in a century, the number of people living in an American household has increased slightly. More homes are being shared with boomerang children and among non-traditional-families.
- Millennials are waiting to buy homes later in life than previous generations.
Factors Increasing Growth
- There are more people in America. There were 50 million more people in America — an 18% increase — living in the US in 2020 than in 2000.
- There are more home buyers. As of 2019, the number of millennials in the US has exceeded the number of baby boomers. And the millennial generation is finally buying homes.
- There are fewer new houses. The absolute number of new houses being built took a decade after the Great Recession of 2008 to catch up to the historical US norm.
- There are fewer new houses per family. More tellingly, home starts per million during the 2010’s were only half that found in any other decade after WWII. Fewer first-time homes and condominiums are newly-built.
As a result, more and more families will find themselves renovating their existing homes or buying older homes that need significant renovation.
Commercial construction, despite a big dip of 23% in 2020, is strong again.
Spurred on by new home and warehouse construction, spending on commercial work appears to have jumped up 4% in 2021 and is projected to grow further in 2022.
Federal spending is growing, too.
The Infrastructure Investment and Jobs Act (IIJA), passed in November 2021, is expected to add $550 billion above the baseline of federal expenditures on an array of additional construction projects.
Budget reconciliation is quite likely to increase construction funding by many more tens of billions. The Brookings Institute suggests that federal funding may well reach the size of the efforts of the New Deal, a big deal indeed.
These funds will take some months to enter the market, but once they do, they will have an impact for several years.
When you consider buying a home, it will be important to understand that home renovation is almost inevitable.
Most home renovations face significant challenges: busy contractors, fewer skilled construction experts, harder-to-schedule inspections, and higher material costs.
Next week I will publish an article outlining those challenges. A few days later I will publish another piece on how to tackle your next home project in a way that saves you hassle and money — while preserving family time.
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In addition to years in product and people management, I am a veteran of decades of apartment/old condo/old house renovations in one of America’s toughest regions for construction. My family has worked for generations in the building trades.
Today I am spending most of my time writing. I would love to share insights with you!
Even better to begin a conversation.
Until then, be well!