Issue 49 – Third Quarter 2024
Despite high interest rates, tight lending standards, policy uncertainty, and labor shortages, the construction industry continues to hold up remarkably well. While certain segments, like office and retail construction, have struggled in 2024, federally incentivized manufacturing projects and federally funded infrastructure projects have kept nonresidential contractors busy. With the presidential election completed, decision-makers should have a better idea of the policy environment they will operate in over the next four years.
The Good
Manufacturing Construction
Manufacturing-related construction spending remains extraordinarily elevated due to federally incentivized megaprojects and a broader effort to reshore production capacity. While the incoming presidential administration may be less amenable to legislation like the CHIPS and Science Act and the Inflation Reduction Act, its trade policy should induce more reshoring, supporting ongoing momentum in the manufacturing segment.
The Strictly Okay
Healthcare Construction
Construction spending in the healthcare segment has fallen from the all-time high established in the first quarter but remains elevated by historical standards. Even with recent declines, investment in healthcare structures should remain elevated due
to changing demographics.
The Bad
Residential Construction
Despite two interest rate cuts by the Federal Reserve, borrowing costs have yet to show a meaningful decline. In fact, mortgage rates have actually risen considerably since reaching a cyclical low in late September, with the average rate on a 30-year fixed mortgage rising from 6.08% to 6.79% as of the first week of November.
The Ugly
Interest Rates
Despite two interest rate cuts by the Federal Reserve, borrowing costs have yet to show a meaningful decline. In fact, mortgage rates have actually risen considerably since reaching a cyclical low in late September, with the average rate on a 30-year fixed mortgage rising from 6.08% to 6.79% as of the first week of November.
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