18 June 2010 – Total construction spending contracted by 4.8 percent in the first quarter of 2010 and is not expected to see positive growth until the last quarter of 2010, according to the Second Quarter U.S. Construction Briefing by IHS Global Insight’s Construction Service.
The residential construction sector, led by single-family construction, is seeing a rebound in activity. Low mortgage rates and low prices will result in improved affordability, which, when combined with income growth, pent-up demand and returning employment, will result in growth in the sector in 2010.
Nonresidential construction, which is still being impacted by high vacancy rates and tight credit conditions, will continue to shrink throughout 2010 and will bottom out in the fourth quarter of the year.
Select key findings from the second quarter forecast include:
- Residential. The residential sector is forecast to grow by 6.2 percent in 2010, and will be led by single-family construction, which is expected to grow by 22.6 percent in 2010 and 43.6 percent in 2011. Multi-family construction, impacted by tight credit conditions and the increasing number of renters taking advantage of the first-time homebuyer’s tax credit, fell by more than 20 percent in each of the first two quarters of 2010. Multi-family construction is expected to turn the corner in the third quarter as household formation resumes and rental inventories shrink.
- Nonresidential. After declining by 6.3 percent in 2009, nonresidential construction is expected to shrink by 13.8 percent in 2010. Nonresidential construction is expected to bottom out by the end of 2010, with positive growth returning in 2011. Commercial construction continues to be affected by tight credit conditions and high vacancy rates; construction in the commercial segment is expected to fall another 34.8 percent in 2010. Retail construction will be the first commercial segment to see a rebound, with sustained growth expected to resume at the end of 2010. Although stimulus funding led to growth of 1.7 percent in Infrastructure construction in 2009, the segment will contract by 4.7 percent in 2010.
The IHS Global Insight Construction Service provides analysis, forecasts, and data on the worldwide construction industry for building materials manufacturers, construction equipment, engineering and services companies, real estate investment and financial services firms, home improvement retailers and architectural firms, and the U.S. and other governments. For the Second Quarter U.S. Construction Briefing Executive Summary, go to www.ihsglobalinsight.com/constructionoutlook.
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