Construction industry consultant FMI has released what it calls a “cautiously optimistic” outlook for the industry in 2014 in its latest quarterly report.
The report predicts construction put-in-place to grow 8 percent this year and for the next few years. “Just like the spring, despite all odds and nasty economic weather, the nation needs to grow and that means more construction projects,” the report says.
The report expects residential construction to remain a high-growth market but notes a decline in growth in apartment construction. Continued acceleration in residential will depend on job growth, wage growth and interest rates among other factors.
The report forecasts 18 percent growth in single-family home construction and 27 percent growth (down from 44 percent in 2013) in apartment construction.
“Although mortgage rates are still low by historical standards, housing affordability is slipping somewhat, mostly due to increasing prices for existing homes,” the report says. “Employment figures are slightly better, but new jobs and pay scales aren’t rising as fast as costs. This will keep the growth rate down for most of the country.”
The report notes another troubling trend that could affect the market for the next few years: the wealth gap. In many major metro areas, housing is becoming increasingly more expensive while low-end markets become less affordable.
In terms of nonresidential construction, FMI likens the market to a groundhog having seen its shadow. The market is awake but will likely see six more months of slow growth due to the harsh winter weather in the U.S. this year.
FMI forecasts 7 percent growth in transportation construction to $4.4 billion and a 1-percent increase in highway and street construction to $82.4 billion. Though the reauthorization or replacement of the MAP-21 surface transportation bill is still uncertain, there is optimism due to President Barack Obama’s proposal of a four-year, $302 billion bill.
The President’s 2015 budget proposes $73.61 billion for surface transportation spending in fiscal year 2015 with most of those funds directed at highway programs.