For better and worse, the lighting industry is largely part of the construction industry. It’s that time of year to look at the residential and commercial construction forecasts for 2024.
RESIDENTIAL:
The National Association of Realtors (NAR) projects existing-home sales will rise by 13.5% to 4.71 million units sold in 2024, from a total of 4.1 million in 2023. NAR also expects the median home price to increase by 0.9% to $389,500.
NAR sees that urban markets in southern states will likely outperform other regions due to faster job growth. Markets in the Midwest will also experience gains from being the most affordable region.
NAR expects foreclosure rates will stay at historically low levels in 2024, comprising less than 1% of all mortgages. There is more good news on the mortgage front. After hitting the 8% mark in late 2023, mortgage rates should average around 6.3% in 2024. Lower rates could also provide a boon for remodeling activity as many homeowners have held off major projects.
For housing starts, NAR is forecasting 1.48 million units in 2024. This includes 1.04 million single-family starts and 440,000 multifamily starts. The most pent-up demand and strongest real estate markets that NAR sees for 2024 are:
- Austin-Round Rock-Georgetown, Texas
- Dallas-Fort Worth-Arlington, Texas
- Dayton-Kettering, Ohio
- Durham-Chapel Hill, North Carolina
- Harrisburg-Carlisle, Pennsylvania
- Houston-The Woodlands-Sugar Land, Texas
- Nashville-Davidson-Murfreesboro-Franklin, Tennessee
- Philadelphia-Camden-Wilmington, Pennsylvania-New Jersey-Delaware-Maryland
- Portland-South Portland, Maine
- Washington-Arlington-Alexandria, D.C.-Virginia-Maryland-West Virginia
The National Association of Home Builder (NAHB) expects single-family housing starts to increase 4.6% in 2024 to 946,000 permits after a cumulative decline of 21.2% over the past two years, the recovery is likely to be quite slow in all but the most robust housing markets.
COMMERCIAL:
Electrical distributor surveys show a slowdown of quotes and projects, but not a recession for 2024. Bright spots are industrial, manufacturing, and reshoring due to federal stimulus spending. Distributors expect Q4 2023 sales to decline 1.6%, which would be the first quarterly decline since 2020.
2024 commercial construction will be strongest in the residential and industrial markets, office and mixed-use construction, hospitals, data centers, schools and universities, renewables, and the utility market.
Dodge Construction Network is expecting 3% growth in the commercial sector in 2024. High interest rates slowed the commercial sector. Higher energy costs and an election year will also be challenges in 2024. Dodge sees solid demand for data centers, life science labs, and hospitals.
ConstructConnect expects total U.S. construction starts to contract 8.1% in 2023, but grow 2.8% in 2024. Part of the 2023 contraction is due to very strong construction growth in 2022. The IRA and CHIPS Act spending will help in the medium term, looking forward.
Deloitte sees 2024 growth in manufacturing, transportation infrastructure, and clean energy infrastructure due to the IIJA, the IRA, and CHIPS Act.
The AIA’s Consensus Construction Forecast expects nonresidential construction spending to increase just 2% in 2024 after a 19.7% boost this year, supported in large part by a 55.1% increase in industrial construction spending.
Semiconductor fab plants, electric vehicle, and EV battery plant megaprojects are being built throughout the Midwest, Southeast, Texas, and Arizona. The Census Department’s construction spending data shows the manufacturing category up 62.5% through September 2023 to $198.5 billion and the computer/electronic/electrical sub-category up 134.9% YOY to $111.1 billion.
ADDITIONAL ECONOMIC FORECASTS:
NAR predicts U.S. GDP growing by 1.5% in 2024 and avoiding a recession. New job additions will slow to 1.7 million next year, compared to 2.7 million in 2023, and 4.8 million in 2022.
The best news is that most economists don’t see a recession in 2024. For more information on the residential forecasts click here, and for the commercial forecasts click here.
All images: Pexels.com
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