Reflecting on the first month of 2024, the construction industry outlook is off to a positive start! As reported in previous Belco Bulletins, December saw a slight dip in single-family starts following a robust November. However, December permits, a leading indicator, continue their upward trend, particularly in the South and West regions.
Year-Over-Year Growth
Both starts and permits indicate growth, suggesting a stronger start to 2024 compared to 2023. However, under construction figures show a decline, and are expected to persist until the surge in permits translates into actual starts. Additionally, the NAHB has revised their Executive Level Forecast, projecting 988k SF (Single Family) starts for 2024. This reflects a 3.13% increase over the previous forecast and indicates an anticipatory 5.46% growth over 2023.
Builder Confidence and Macro Trends
Builder confidence is on the rise, with January’s reading up by 7 points to 44. Notably, the surge is led by a 12-point increase in the indicator of single family sales. Alongside gearing up for the traditional spring selling season, favorable macroeconomic factors contribute to this optimism.
- The change in median home price is stabilizing, dropping by 0.18% from October to November but still 5% higher than a year ago.
- The 30-year fixed mortgage rate hovers in the mid-6% range, with the potential to decrease further amidst rumors of Fed cuts around mid-to-late Q2.
- NAHB research indicates a decrease in the share of young adults living with their parents, boosting demand for both rent and for-sale inventory.
Addressing Affordability
Despite positive indicators, affordability and qualification hurdles persist. Ali Wolf from Zonda suggests that new construction can alleviate some of this pressure by adapting home size, type, location, and input prices to align with consumer budgets. An NAHB HMI special survey noting key problems of 2023 and expected issues for 2024 is insightful as we push into the year collectively:
Facing Challenges Ahead with Optimism
Challenges for builders in 2024 include interest rates, lot availability, construction fees, employment, and regulations. However, with favorable conditions, the construction industry outlook suggests a promising year ahead. Belco Forest Products is poised to tackle 2024 with our incredible trade partners as we continue to set the standard for manufacturing premium exterior trim and fascia products!
