| A few comments, suggestions, and ideas… |
It’s no secret that the residential construction sector in the US is on fire. Pandemic be damned. In fact, most experts believe that COVID-19 is largely responsible for the dramatic increase in construction activity. A recent headline in the usually stuffy Wall Street Journal screamed “It’s a housing boom ignited by the pandemic”. A deeper dive into the article points to historically low interest rates, new younger buyers entering the market, and a complete rethink of the importance of home, as factors contributing to the housing boom. Even with the rising costs of building materials, supply chain disruptions, and labour shortages, young buyers continue to drive the growth in residential construction. In fact, the National Association of Realtors has the median price of a new single family home nationally at $346,000, up a significant $51,000 since the pandemic began in March 2020. Some pundits suggest that this is a temporary upswing and construction will level off once things return to normal. But the WSJ article suggests that with strict mortgage rules, larger down payments, and a tight housing supply, this boom is no bubble. The residential construction market is more robust, stable and far less risky than the market boom in 2005-2007. The article also points out that the United States is currently experiencing a “significant transfer of wealth”, as younger demographics inherit considerable riches from their parents and grandparents, which is often then invested into their homes. All of these economic drivers suggest that the continued growth in US residential construction will continue far after the pandemic ends. For more information on the US market and to take advantage of our market development activities, please reach out to me at dfarley@bcwood.com |
