As we enter 2024, builders and contractors across the U.S. are wondering what the year will bring for the construction industry. Understanding the economic forecast for the year is critical to making informed decisions for your business. In this article, we will explore the economic forecast for 2024 as it relates to the residential and commercial construction industry.
According to a press release from the Fannie Mae Economic and Strategic Research (ESR) Group, economic growth is expected to slow in 2024, which may result in a mild recession. This prediction suggests that builders and contractors must prepare for a weaker economy and potentially tighter financing conditions.
While existing home sales are projected to decline further in the near-term, they are anticipated to bottom out in early 2024, with modest growth expected after that. However, this growth is expected to be constrained by the "lock-in effect" and the low supply of homes for sale. Builders and contractors should be ready to address this challenge if it does come along.
Despite the expected slowdown, new home sales and starts are anticipated to remain comparatively resilient in 2024, offering a silver lining for builders and contractors. However, as with existing homes, the low supply of homes for sale and the lock-in effect will likely constrain growth. This may lead to more homeowners seeking to remodel what they have rather than opting to move.
Mortgage rates are also expected to play a significant role in the housing market in 2024. While rates are predicted to retreat from their recent highs, the ESR Group forecasts that they will average 6.8% by the fourth quarter of 2024. Thus, builders and contractors should prepare for potentially higher mortgage rates, which could impact demand for new construction.
Finally, the ESR Group anticipates a gradual recovery in home sales in 2025, aided by modestly downward-trending mortgage rates. As builders and contractors look towards the future, it is essential to keep this forecast in mind and plan accordingly.
2024 is shaping up to be a challenging year for builders and contractors. While the housing market may experience challenges, there are also some positive indicators such as resilient new construction and a gradual recovery predicted for 2025. By keeping the economic forecast for 2024 in mind, builders and contractors can make informed decisions and weather any challenges the industry may face in the coming year.