Economists Weigh In On 2016 Forecast
Industry Recovery Should Continue
The construction industry generated some momentum last year, and the general consensus among economists and other professionals is that this trend will accelerate through 2016.
David Crowe, chief economist for the National Association of Home Builders (NAHB), said: "The housing market is being driven by the improving labor market. Adding jobs is particularly important to young adults on the verge of forming their own households."
Crowe said he expects multifamily construction to remain well above historic trends, mainly because many people in the millennial demographic group are choosing to rent rather than buy.
Single-family construction, in contrast, is moving upward but at a much slower pace. The industry is barely halfway back to a stable level of 1.3 million units per year, a pace last seen in the early 2000s.
"Most of the trends and forces that have slowed the housing recovery are gradually disappearing," Crowe said. "More households are being formed; more jobs are being created; home equity is increasing; and confidence is coming back. The next year looks particularly strong for all these reasons."
Housing starts are expected to increase in 2016 by 136,000 to 1.26 million units. If that happens, it would be the best year in housing starts since 2007, Crowe added.
Ed Sullivan, vice president and chief economist for the Portland Cement Association (PCA), said: "We will continue to experience an increase in the multifamily construction market. I believe we will also see a continued uptick in commercial building construction. With employment and spending on the rise, along with property values, look for last year's 10 percent increase in commercial construction to carry over this year."
Rising consumer spending boosted the economy in general, and that bodes well for commercial construction this year, said Anirban Basu, chief economist for Associated Builders and Contractors.
The multifamily boom should last another year, and condominium construction should also improve, Basu added.
Ken Simonson, chief economist for Associated General Contractors of America (AGC), said Census Bureau data show that, in the first 10 months of 2015, multifamily construction jumped by 25 percent from the same period a year earlier, while homebuilding climbed 14 percent.
"Those growth rates are likely to slow down in 2016 but remain quite healthy, with multifamily increasing another 10 percent or more and single-family tacking on another 5-10 percent," Simonson said.
Jeannine Cataldi, of the market research firm HIS, said the residential market has been driven in large part by the multifamily sector, with single-family construction making much smaller strides.
"Looking ahead, construction spending in 2016 will moderate in the multifamily segment as supply begins to align with demand," Cataldi said. Single-family construction should be stronger in 2016 as economic conditions continue to improve.
Housing starts are expected to grow at a stronger pace in 2016 than in 2015.
The outlook for 2016 also calls for spending on commercial construction to continue at a more moderate pace. Strong growth is expected in the office and warehouse segments.
Associated General Contractors said gross domestic product should grow between 2.5-3.0 percent.
Associated Builders and Contractors expects GDP to expand by less than 3 percent because of a weakness in foreign markets. Consumer spending in the U.S. will remain strong.
The National Association of Home Builders said the outlook for 2016 remains positive. Problems that affected the economy and held the recovery in check are slowly dissipating. The NAHB expects the GDP to grow 2.8% in 2016 and add 3 million jobs.
Portland Cement has downgraded its growth projections to 2.6 percent from around 3 percent.