Page 10 - ProInstallerJanuary-February 2022
P. 10

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






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