After Slow First Quarter, Top Expert Sees Another Strong Year for HousingJanuary 25th, 2021 by Drew Vass
While 2020 will forever represent a blight on world history, so far as the U.S. economy is concerned it managed to include one bright spot: housing. In January 2020, ahead of the coronavirus, leading experts told [DWM] that even if an economic downturn were to occur, residential construction was expected to continue, despite the circumstances. By March, some of those analysts found themselves in doubt of their predictions, but then a surprising thing happened: Americans kept moving.
With interest rates hanging at record lows and a pervasive desire to move from urban to lower density markets, homebuying activities held steady, helping to drive new construction and remodeling.
Each year, [DWM]’s editors research predictions for housing and the economy, including interviews with leading experts. Among the leading firms for the field of construction is Dodge Data and Analytics, which, in its 2021 forecast, predicts that total construction starts will gain modestly at 4% for the year.
Following is a brief interview with Kim Kennedy, Dodge’s director of forecasting, about what she sees in the year ahead.
What a year to be director of forecasting, right?
It’s been fun, let me tell you [laughs].
How much of a repeat is 2021 expected to be?
Very early in 2021, we could see some disruptions … until vaccines are able to get out there more comprehensively … but once vaccines are out there, I think that we’re going to see things visibly start to change … I think we’re going to see a lot of growth from where we are right now, producing a positive year for construction.
Is there any part of you that’s surprised at how well construction has held up?
I’ll be honest, all of me is surprised by how well residential has held up. I mean, we had dramatic, dramatic declines in employment … one thing that’s helped to hold it together is interest rates, which have fallen to unprecedented lows. I mean, 2.7%. Who can say no to that?
Historically speaking, hasn’t it been the norm to expect construction and housing to help carry the economy through tough times?
Actually, construction is a pretty cyclical industry, that typically turns down pretty sharply in a recession. Because it was labeled one of the essential industries amid COVID-19, I think that maybe this most recent downturn was more of an exception to the rule. At the same time, there is certainly a floor under construction where there is a basic need for new buildings—new homes and multi-family housing … it’s basically long-term driven by demographics. There will always be a need for it, so long as the population is growing.
What do you see as the biggest challenges in 2021 for construction? Will it continue to be such things as the cost of lumber, cost of building in general and labor shortages?
I think it will be more the normal hit list, but I think that a lot of the problems we faced in 2020 will begin to dissipate, so things should be looking up for construction in 2021. There are certainly bigger issues down the road … but in the near term we’re going to be in a recovery mindset instead of the mindset for overcoming barriers.
Does that point to a slow but steady recovery in 2021?
That’s right—starting really slow in the first quarter, but then picking up speed as the year progresses.
For more insights into the year ahead, look for an annual outlook in [DWM]’s January-February issue, including input from additional experts.
For a detailed look at expectations for fenestration, see Key Media & Research’s 2021 Door and Window Industry Outlook, including a comprehensive look at the industry and the year ahead. (KM&R is [DWM]’s parent company.) Use the promo code DWM20 for 20% off.