Homebuilder Confidence Remains High

On the heels of numerous positive predictions for residential homebuilding's 2017 outlook, a new midyear metric was released that shows homebuilding confidence remains high. Prior to January, forecasts for building materials and homebuilding were very optimistic and positive. Growth rates as high as 10% were forecast for 2017 residential homebuilding.

For now, it seems as if the positive outlook is manifesting itself in reality. Homebuilders are confident that the residential market will remain lucrative. The Housing Market Index continued to rise this month, reaching a measure of 70 (anything over 50 is positive, so 70 is a very optimistic level).

So far this year, the apparent barriers to new homebuilding are a lack of trained labor and the potential for interest rate increases. The need for trained construction workers has been well-documented, and many builders feel that struggling to hire workers is hampering their ability to build. Further, projected interest rate increases and rising home loan rates will add a bit of cost to home ownership. Though, these two factors haven't seemed to slow homebuilding much. In all, residential homebuilding looks great this year.

2017's Construction Forecast Looks Encouraging

New year, new project starts. A lot of new project starts. Construction projects are expected to increase 5% in 2017, which is a welcome development as 2016's new starts lagged sorely behind expectations - a measly 1% increase was seen in 2016.

Dodge Data & Analytics also expects to see large gains in single family homebuilding, commercial development, and institutional building. Unfortunately, multifamily development is expected to stagnate, as will utilities construction.

Interestingly, both 2015's and 2016's totals were skewed by only a handful of massive projects that kicked off in 2015, effectively acting as enormous outliers and altering both years. 2017 is expected to be far more "normal" in the sense that totals will not be skewed by a few projects (such as 2015's $9 billion natural gas terminal project in Texas). This is also in part responsible for the decline in energy/utilities related building expected this year. 2015's enormous projects are coming on-line, thus driving down the need for new construction in those industries.

While none of the new projects announced this year will need our products and services for some time, we remain excited about the positive prospects that 2017's project starts may bring. Here's to a great 2017!