COVID-19 has created a housing boom thanks to the historic-low mortgage rates posted throughout 2020 and most of 2021. Because they suddenly can afford to buy homes, many people dipped their toes into the real estate market.
But, shortly after, the cost of owning a house started creeping up. The demand was high. However, there were not enough available properties in the market for everyone to buy. As a result, buyers went into bidding wars that exponentially raised the cost of the property.
It is estimated that about 5 million more new homes are needed to satisfy the demand. However, in the past year, the construction industry was among those that had to pause operations temporarily. Right now, contractors are still very busy fulfilling backlogs.
The Post-Pandemic Construction Outlook
The construction industry quickly recovered after the pandemic. The total spending across the United States in November 2020 reached $1.459 trillion, the highest since the government started tracking data 18 years ago. Construction-related spending also rose by 3.8 percent on a year-on-year basis.
By March 2021, the industry added around 110,000 jobs – about 80 percent of the lost jobs over the past year.
The quick recovery of the industry can, of course, be attributed to the pandemic housing boom. It was fueled by record-low mortgage rates, but the pandemic also pushed many people to move out of the city and settle into suburbs and other low-density areas.
More single-family homes, which are in tight supply, were added this year. Seven hundred twelve thousand single-family homes were under construction in September 2021. This was the highest number of single-family homes being built since 2007.
The construction of single-family homes is crucial because, right now, many young people are looking to buy their first house. Millennials, in particular, are struggling to find a property that is suitable for the size of the household and their budget.
Many multi-family buildings, such as apartments, are currently under construction for those not looking to buy a house. This year has the highest number of multi-family buildings being built since 1974.
Experts predict that the construction industry will grow by more than 15 percent by the end of the year.
Taking Advantage of Construction Boom
Now is the best time for entrepreneurs to venture into the construction industry. The ongoing construction boom, which is expected to remain strong for the next couple of months and years, ensures demand for related products and services.
For example, the increased activity in construction means that there will be a surge in demand for equipment. Contractors will be looking for more heavy machinery such as bulldozers, excavators, tower cranes, and skid steer loaders for sale to add to their fleet.
The market for the rental of construction equipment is also expected to expand further. By 2026, analysts expect the market to reach $145.22 billion as more firms seek ways to cut costs and achieve fleet flexibility.
Prepare for Challenges
However, the construction industry is still grappling with multiple challenges.
While many countries have lifted pandemic restrictions, the global supply chain of goods, including building materials, is still experiencing disruptions. Recently, China temporarily shut down one of its biggest ports, guaranteeing that there will be further delays in the delivery of goods.
Many basic materials needed in construction are becoming more expensive because of the shortage. Contractors around the world are taking much longer to complete projects. Because costs of materials are rising, so are the expenses that come with constructing a home.
Moreover, there is a problem of labor shortage. Every industry right now is facing a lack of workers who are capable and willing to work. COVID-19 created the problem of mass unemployment but, now that a huge percentage of the population has been fully vaccinated, a lot of people are now eager to go back to pre-pandemic jobs.
In the case of construction, the shortage has existed even before the current public health crisis. During the Great Recession, many construction workers switched careers and never returned. The industry is now experiencing the lack of capable hands that have been building up for several years.
In addition, stricter immigration policies and border closures have prevented workers who have the skills to enter the labor market and fill vacancies.
The housing boom is boosting the construction industry, aiding in the latter’s quick recovery post-pandemic. The demand for housing and renovation makes now a great time for entrepreneurs to explore the market and establish their own business ventures. However, expect some rocky beginnings. The industry is also currently facing shortages in materials and workers.