Value of construction

The estimated value of construction is projected to reach $1,490.3 billion in 2025, reflecting a growth rate of 1.3%. The sector's performance is being influenced by the ongoing stabilization and gradual decline in interest rates, which is expected to spur modest improvements in both residential and nonresidential construction. While mortgage rates remain above pre-pandemic levels, their slight decrease in 2025 is anticipated to support increased activity, particularly in the residential market. The supply of new homes continues to lag behind demand, keeping upward pressure on prices. Nonresidential construction is experiencing muted gains as some segments, such as offices, continue to struggle with shifts in work patterns, though demand for data center development is helping offset sectoral weakness.

Over the five-year period from 2020 to 2025, the value of construction has been shaped primarily by macroeconomic volatility, changing work patterns, and varying monetary policies. In 2021, construction activity rebounded from the pandemic low, growing by 5.3% as the economy reopened and government stimulus spending, such as the CARES Act and American Rescue Plan Act, injected more than $4.0 trillion into the economy. However, in 2022 and 2023, the industry contracted by 3.9% and 0.3%, respectively, as the Federal Reserve raised interest rates to combat inflation. Higher borrowing costs dampened housing demand and delayed new investments in nonresidential projects, particularly in the office sector, which continued to adjust to a remote and hybrid work environment. During this period, the residential sector was also pressured by doubling mortgage rates from pandemic-era lows and ongoing supply constraints, which limited the pace of homebuilding and pushed prices higher. Despite these headwinds, pockets of growth persisted in nonresidential construction driven by increased investment in healthcare facilities and, later in the period, growing demand for logistics and data infrastructure.

The construction market included supply chain disruptions and labor market constraints. Materials shortages and rising input costs contributed to overall project delays and elevated construction costs, while regulatory environments also played a role in shaping profitability. Labor availability became an increasing concern as demographic changes and shifts in immigration policies restricted the supply of skilled workers. These factors drove fluctuations in both costs and activity levels, amplifying industry volatility throughout the period.

From 2020 to 2025, the value of construction experienced modest annualized growth of 1.2%. The period was defined by macroeconomic cycles, fluctuating interest rates, supply chain challenges, and evolving market demands, particularly regarding work patterns and technological advancements. Recovery and expansion remained uneven across segments, highlighting the complex interplay of economic, demographic, and policy-driven factors that have influenced construction activity.