Market forecast for 2010
Numerous studies at the national, regional and local levels point to an upturn in the construction market in 2010, or at least less of a decline. Within the reports, it is forecasted that the residential market will fair better than the nonresidential market.
The following table provides a summary of recent industry reports illustrating the year-to-year changes observed through 2009 as well as those forecasted for 2010 and beyond. The causes and expected effects of these trends is discussed below.
| Report | Date | Measure | 2008 | 2009 | 2010 | 2011 | 2012 |
| AIA ConsensusConstruction Forecast Panel | 7/10/09 | Non-residential construction activity | -16% | -12% | |||
| McGraw-HillConstruction Forecast | 10/9/09 | Value of Building Starts | -25% | 11% | |||
| Value of Single Family Building Starts | 30% | ||||||
| U.S. Construction Briefing by IHS Global Insight’s Construction Service | Q3 | Total Construction Spending (Annualized) | -12%* | -4% | 10% | 10% | |
| Commercial Construction Spending (Annualized) | -27.9% | ||||||
| Reed Construction Data | 10/6/09 | Total Residential Construction Spending | 14% | ||||
| Total Number of Units | -32.9% | -36.9% | 24.0% | 27.0% | |||
| West Region Number of Units | -38.3% | -34.2% | 20.8% | 30.7% | |||
| Colorado Legislative Council Staff – Economics Staff | 9/21/09 | Colorado Single-Family Permits | -38.0% | Positive | |||
| Colorado Multi- Family Permits | -73% | Positive | |||||
| Value of Nonresidential Colorado Construction** | -27.5% | ||||||
| Eagle, Pitkin & Summit County Value of Permits (Res/Non-res)*** | -72.4%-97.2% | ||||||
| Routt County Value of Permits (Res/Non-res)*** | -76.8%-89.2% | ||||||
| Mr. Oken , Pitkin County Treasurer | 10/14/09 | Community Development Fees (e.g., Building Permit Fees) | -35% | 5% | 0% | 0% |
* Residential expected to rise 2.1% from Q2 to Q3 and an added 4.8% in Q4
** Through July compared to same period in 2008; specifically, commercial business was down 44.2% from 2008 and hospitals/health treatment business was down 81.5%
*** Through July compared to same period in 2008
The cited causes of the residential market decline include the current weak economy, job losses, the limited ability to obtain financing, a large inventory of unsold homes and related declining home prices, as well as expected additional foreclosures. The non-residential market fall is believed to result from the limited availability of credit, increased vacancies, halted expansion and downsizing.
Future growth is citied to be dependent upon low mortgage rates, the continuation of government incentives (e.g., new home buyer tax credits), and easing of the foreclosure trend, as well as increased buyer confidence and rising employment.
Unfortunately, the downturn has also resulted in severe job losses to date in the construction industry. According to the July 10, 2009, AIA Consensus Construction Forecast Panel report, though the construction industry accounts for only 5% of the economy’s payroll employment, it has accounted for 20% of the job losses since the downturn began. Architectural employment has declined nearly 14% alone.
The slow economy has also led to lower prices for materials but this trend may begin to reverse. The AIA report notes that steel, copper, and aluminum declined at least 20 percent, and lumber and plywood declined 14 percent since the downturn began. Similarly, a Reed Construction Data (RCD) article of October 19, 2009, states “construction material prices fell 7.5% from September 2008 to August 2009” but adds that the price index has been basically level since June.
The RCD report forecasts prices to remain constant or even rise slightly over the winter as a result of high but declining inventories, increased demand from the faster Asian economic recovery, and the depreciating US dollar. Come spring, the expected strengthening of US, Canadian and European economies should increase construction material demands at a “modest pace” to inflate prices further. Overall, RCD predicts material prices to rise 5% to 6% in 2010 and “slightly more” in 2011. (For more detail, the article presents price changes over the past 3 years for numerous commodities, equipment and other construction inputs.)
Sources available upon request.
