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Residential Construction in 2020: A Look at the Impact of COVID-19

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The COVID-19 pandemic has had far-reaching consequences globally, and those in the residential construction market are feeling the impact of the global health and economic crisis. Here is how the pandemic has affected residential construction so far in 2020 and what industry experts predict for the future.

Residential Construction Results

The U.S. Census Bureau reported that spending on residential construction projects dropped 4.5% in May alone. Lost jobs and rising unemployment or underemployment are hurting an industry that relies on homebuyers having the means and the willingness to purchase.

According to real estate site Redfin, the supply of new homes on the market fell 10.5% in the 12 months ending in April. And that situation is expected to get worse. The Census Bureau reports that housing starts and completions in April dropped 29.7% from the prior year, and permits were down 19.2%. Also in May, more than 400,000 residential construction workers lost their jobs.

Delays Are Impacting the Market

The pandemic and everything that has come with it has brought all sorts of delays to the residential construction space. Homebuyers that do want to purchase a new home are urged to exercise patience.

It takes longer to get permits and inspections due to business and government shutdowns, some places have ongoing materials shortages, and construction workers are making adjustments to allow for social distancing on job sites.

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Different Ways of Buying New Homes

New home builders have been faced with a myriad of challenges in 2020 to meet customer needs and continue to produce results. In many cases, virtual tours of homes have replaced walking through models or recently-completed units.

One of the attractions of buying a new home is that it’s something no one has lived in or touched before. That said, many buyers are faced with going through the design process virtually, and some are finding that their wants and needs have changed drastically.

If 2020 has done anything, it has shown homeowners that being cooped up in an uncomfortable home can be torturous. Families are rethinking and prioritizing features like dual office spaces and outdoor recreation areas.

Predictions for Residential Construction

Much of what happens with residential construction going forward is going to hinge on how this country responds to the pandemic. But the chief economist at the National Association of Home Builders, Robert Dietz, predicts a roughly 20% decline in single-family construction this year with a rebound at the end of the year and momentum in 2021.

Even so, builders have become more optimistic. The NAHB-Wells Fargo Housing Marketing Index, which represents builder confidence in the single-family home sector, dropped to 30 in April, an eight-year low. It quickly bounced back to 72 in July.

In truth, there are plenty of factors that point to a strong residential home market going forward: historically low interest rates, population growth, household formation, and the continuing growth of the older adult home buyer.