Page 10 - ProInstallerJanuary-February 2022

2021-2022 U.S. Construction, Current and Future Outlook, Continued

Reserve has started to unwind some of its measures to We expect inflation protected assets such as real estate
prop up the economy, we have doubts that it can raise and equities to continue to outpace inflation, offsetting to a
interest rates significantly as that poses a risk of slowing large extent the loss of buying power of the U.S. dollar.
economic recovery.
Freddie Mac estimates the U.S. housing shortage has
And as we elaborated over the last year the only way to increased to 3.8 million homes besides the additional
amortize the enormous debt burden created during the 1.5 million new homes that the U.S. needs per year. The
pandemic (122% debt to GDP ratio)—which is an increase shortage was a direct result of builders’ and lenders’
of 15% from 2019—is through inflation which we see at full lackluster activity for a decade after the great recession
display. We expect inflation to remain elevated for another (starting in 2008). For builders to catch up to actual
three years before inflation decreases to the long-term demand, they would have nearly to double completed
Federal Reserve target to 2-3% per year. annual inventory (total of 2.8 million units) for the next five
to six years. At the current rate of housing completions at
Supply chain issues continue to persist and shipping costs 1.42 million units per year (the highest rate since 2007), the
remaining at a near all-time high. As the pandemic comes backlog will continue to widen and keep the residential
and goes in waves, it interrupts the flow of commerce construction markets going strong.
accordingly causing ongoing strains on supply chains.
We do not foresee this to change until into late 2022. As a Commercial construction has stabilized from its incredible
result, pent-up demand, strained supply chains and rising decline due to the pandemic and from here will start to
costs will keep inflation at 4-7% going into 2022. grow. We believe this will take time to get back where it
was in 2019 depending on the duration of the pandemic
The pandemic backlogs at city planning offices including and what the final “new normal” will look like when all is
staffing shortages have caused delays in issuing building said and done.
permits in a timely fashion. Likewise, construction worker
shortages and material delays will continue to persist for The infrastructure bill will add a significant boost per year
new inventory to come to market at slower than pre- to modernize some of our aging construction-related
pandemic levels. infrastructure, increasing it for the next five years by
around 30%.
Outlook 2021/22
As our economy has adjusted very well to function during Look for our next Market Trends article in July 2022 when
a pandemic and the underlying fundamentals, we remain we look back and see how the construction economy has
optimistic for construction to continue to grow. The U.S. developed.
is positioned far better than any other nation in the world
to reap the windfall of pent-up demand and very robust Editor’s Note: No portion of this article shall be used
growth across the overall economy due to our exceptional without the written consent of Tego Systems Corp. and
rule of law and the ease of doing business. ProInstaller magazine.

US Construction Cost Inflation

20%

18%
16%
14%

12%
10%

8%
6%

4%
2%

0%
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10 PROINSTALLER MAGAZINE • JANUARY/FEBRUARY 2022