In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses construction spending.
- Construction activity is making slow but steady improvements. The latest data shows a 5 percent gain over the past year in the overall value of newly completed construction. Private multifamily buildings are being completed at a faster pace than single-family buildings, in response to low apartment vacancy rates and a renewal of interest in condominiums.
- Only slight gains are being observed in commercial real estate construction, such as new office, retail, and warehouse buildings. Still, elevated vacancy rates in the commercial sector and the difficulties of obtaining construction loans for projects are holding back recovery.
- A steady recovery in construction has resulted in 400,000 net new construction jobs (including general contractors) over the past 3 years. There are 5.8 million workers in the construction sector today. However, the job recovery in this sector still has a long way to go. At the peak in 2007, there were 7.7 million workers.
- A housing shortage, in regards to low apartment vacancy rates and low inventory of homes for-sale, can easily be relieved with increased construction. Further, many entrepreneurs could be thinking of renting out spaces in growth regions. But the extreme difficulty of obtaining construction loans, perhaps due to onerous new financial regulatory burdens and easy lawsuits against banks, is hindering not only the real estate market recovery but also the broader economy and jobs.