Value of residential construction

Residential construction is influenced by a complex interplay of economic, demographic and regulatory factors. The housing market's health is closely tied to interest rates, with lower rates generally stimulating construction activity by making mortgages more affordable. However, labor shortages and fluctuating material costs pose significant challenges, impacting project timelines and budgets. Government policies, including zoning regulations and environmental rules, can either facilitate or hinder development. Regional differences also play a role, with states like Texas and Florida experiencing increased housing supply due to proactive construction policies and land availability. Additionally, demographic shifts, such as the influx of Millennials into the housing market, contribute to long-term demand.

Residential construction experienced a surge in activity following the COVID-19 pandemic due to historically low mortgage rates influenced by Federal Reserve policies. The shift to work-from-home arrangements also spurred demand for housing as consumers sought to accommodate changing lifestyle needs. However, this momentum has faced headwinds, with mortgage rates more than doubling by 2023 and a transition to hybrid work settings. Despite these challenges, modest growth in 2024 was supported by stabilizing mortgage rates, and further growth is anticipated in 2025 as rates are expected to decline slightly, thereby improving housing affordability, albeit they remain elevated compared to pre-pandemic levels.