Residential and nonresidential construction
The prosperity of the construction industry during the economic slowdown last fall may be a mixed blessing for 2002. Construction activity had been stronger than expected and jobs slated for the spring of 2002 were completed early, reducing the already established 2002 construction value. Overall, construction spending is forecasted to recede in 2002, but successfully bounce back in 2003.
In the single-family market, look for decreases in home prices and some decline in the value of single-family construction due to tight competition, cheaper building costs and slightly smaller home sizes. The forecasted construction spending for single-family homes decreased from $241 million in 2001 to $239 million in 2002, but is expected to grow to $265 million in 2003. The same is forecasted for multifamily residential construction in 2002 with a significant drop from 2001, but a rebound in 2003. However, the multifamily market's demand essentials remain reliable because of low vacancies and strong rental rates.
In January, existing home sales grew, reflecting growing consumer confidence that the economy is improving. Even though estimates from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development showed new home sales to be down in January by about 12 percent from last year, they are still encouraging statistics.
Education construction spending had to be reduced for 2002 due to lower state and local tax revenues and resulting tough budget choices. Since September 11, many school districts are trying to move funds to balance budgets in anticipation of lower revenues. However, spending on new schools, additions and renovations will raise to record levels in 2003 and continue as the state budgets grow with the recovery.
New office construction has soared during the past five years, but now it seems to be in the middle of a drastic slowdown. The forecasted flat rate of growth appears to be weak for 2002, as office vacancy rates climb and company layoffs put office space back onto the market. Yet, data from Reis, Inc., established that a slowdown in the market began early in 2001.
Source: Construction Outlook, First Quarter 2002 Report, FMI Corporation, (919) 787-8400. For more information, visit www.fminet.com.
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