Page 8 - ProInstallerJanuary-February 2022

Market Study:

2021-2022 U.S. Construction, Current

and Future Outlook

By Daniel LoBue, Tego Systems Corp.

ince our last article (July/August 2021 ProInstaller), As the COVID-19 pandemic approaches the endemic
we all have witnessed construction markets grow phase, we see more permanent trends regarding a hybrid
Ssignificantly because of very low interest rates. work environment, with people working from home several
In addition, severe supply chain issues, all-time high days a week, video conferencing rather than actual travel
shipping costs, ever-rising material costs, shortages of and the shift to Airbnb-style vacations. Society has fully
inventory stemming from the great recession and ongoing adjusted to these changes; we believe the narrative for a
strong demand have and will continue to deliver strong very strong residential market remains intact, and demand
construction activity. will continue at robust levels for several years to come.

Residential Housing Construction Multifamily permits have remained strong as well, having
We are on track for a 4% increase year-over-year from grown from 437,000 to 528,000—a net increase of 21%.
2020 in single-family housing completions at an annual And, with the shortage of housing inventory, we see this to
rate of 1.282 million units (final revised Sept. data). Total continue strong into 2022.
construction spending in residential housing has risen to
$778.60 billion which represents an increase of 27% due Commercial Construction
in part to the very high construction inflation. The Case After adjusting for construction inflation on an annualized
Shiller Report published FRED states that house prices basis, commercial construction is still trending downward
at the end of September 2021 were 24.5 % higher than in compared to 2020. It has only grown by 1% in total
September 2020. Deducting 7% for an average property construction spending from $464 billion in 2020 to $469
appreciation of 7% puts the actual construction inflation at billion in 2021. With 17.5% construction inflation, this sector
17.5%. is still 15-18% below 2019 levels. We do expect some
improvement for 2022 but our previous assumptions still
Residential housing permits have risen to 1,650 million—an remain in place. We made our case through the pandemic
increase of 12% compared to 2020. Permits have also lost a that the reduced demand for office, retail and hospitality
little steam since earlier in the year as construction enters space will persist, while industrial space will steadily grow
a slower cycle during the winter months. as consumers continue to shift to online from in-store
shopping.
Housing Completions, Needed Housing vs. Shortage
in 1000 Units Public Construction
Public construction after
adjusting for inflation,
despite a 2% nominal
4000 growth, remains flat over
last year at $339 billion.
3500 With the recently passed
infrastructure bill, we
3000 expect spending over
the next five years of
2500 $550 billion will increase
significantly.
2000
Inflation, Price Increases
1500 & Supply Chain Issues

1000 The Federal Reserve has Charts By Daniel LoBue, Tego Systems Corp.
now officially moved away
500 from the terminology
of “transitory” inflation
0 and the official number
Completed Needed Shortage has increased to 6.80%.
Even though the Federal

Continued
8 PROINSTALLER MAGAZINE • JANUARY/FEBRUARY 2022