Builders' confidence has currently fallen to 43% in June 2024, but housing construction is expected to pick up in 2025. The current economic environment of declining value of existing buildings, together with the high cost of building new facilities, often tips the balance toward reconstruction rather than construction of new buildings. The share of reconstruction in total construction activity is expected to continue to increase in the coming years. In addition, the National Association of Home Builders reports that construction costs remain high, driven by labor shortages and supply chain disruptions. If you're a construction equipment manufacturer or distributor, focusing your efforts on the first regions is more likely to maximize sales this year.
Spending on non-residential buildings is expected to increase by more than 7% this year, but then slow down to just 2% next year. While the overall market for non-residential buildings is seeing reasonably healthy growth this year, its performance has varied considerably by sector. A final consideration that will affect future construction prospects is the growing importance of reconstruction activity as a percentage of total construction spending. As a result, these construction sectors, which normally take a different approach to design, material composition and contractor specialization, now represent a large part of the benefits that the industry has recently registered. The signs of a continuing slowdown include a challenging credit market for construction projects, the continued weakness in the value of commercial properties, and the continuing weakness in the turnover of architectural firms.
This is the first in a series of analyses that examine the state of the construction industry at the regional level and use data from the new Interact Analysis Construction Barometer data visualization service. Monthly data on housing permits are a good short-term indicator of the state of the residential construction market. Let's take a look at some indicators that show the evolution of single-family residential construction in 2025. Taking into account the expected slowdown in construction over the next two years, the AIA points to an increase in long-term interest rates, which has led to a tightening of construction loans. These are the main findings of the mid-year update prepared by panelists from the AIA Consensus Construction Forecast, a group comprised of leading construction forecasters from across the country.
In all key sectors, manufacturing construction will see a 10% increase in 2024, while institution-building will record mid-digit gains in the next two years.
