Although the Federal Reserve finally began cutting interest rates in the second half of the year, overall construction growth was modest in 2024, according to the Dodge Construction Network.
“Construction starts continue to move more or less sideways and are making little progress despite the Federal Reserve’s first round of rate cuts in September and November,” said Richard Branch, chief economist at Dodge. “Although the backlog of projects piling up in planning is large, developers appear to be concerned about how the economy will fare in the new year and do not appear to be willing to commit to moving projects forward.”
Branch notes that some of these concerns are driven by uncertainty due to the incoming administration. “First, there are likely to be concerns over the tariffs and immigration enforcement promised by President-elect Trump when he takes office. Should they occur, they are likely to offset any benefits to the industry with lower interest rates and could further delay projects.”
In the first 11 months of the year, residential starts were up 8%, according to Dodge. After a strong start, growth in the single-family sector has slowed, which Branca attributes to mortgage rates remaining high. Multifamily starts “remain on the decline,” but an increase in the planning stage suggests this market could see some growth next year. In October and November, the largest multifamily projects to break ground were both in New York City: the $637 million Utopia Living apartments in Flushing, Queens, and the Frederick E. Samuel of $384 million in Manhattan.
Nonresidential starts rose 4% through November overall. In this category, institutional starts saw the largest increase at a 17% year-over-year pace, largely due to growth in health care, transportation and sports/recreation projects.
Data centers and hotel work drove starts in the commercial sector, up 5% year-on-year. The most prominent non-residential projects to break ground in the past two months were the $2.2 billion Henry Ford Hospital tower in Detroit and the $1.4 billion third phase of the Battery Plant expansion from LG Electric in Holland, Michigan.
In the non-construction sector, starts “remain reasonably robust,” says Branch, who points to a 5% increase through November. The environmental public works and pipeline markets have been strong, while utility starts fell 16% year-to-date. The branch notes that by removing the utility category from the sector, non-building starts overall would increase by 13% over the same time period. In the past two months, the largest nonbuilding projects to break ground were the $2.8 billion Central Everglades Reservoir Embankment project in Palm Beach County, Fla., and the $1.6 billion Haynesville Natural Gas Pipeline through 255 miles in Louisiana.
Picks on the wood
S&P Global’s fourth-quarter forecast sees softwood prices falling 3.5% overall in 2024, down from the 6% drop predicted in the third-quarter forecast.
“Spot softwood lumber prices have risen in recent months to levels not seen since 2022,” says Luke Lillehaugen, senior economist at S&P Global. “Price growth has been driven by a variety of factors, including the continued tightening of supply, the start of interest rate cuts by the Federal Reserve and political developments around the North American election. -Americans and the speculation about possible tariffs”.
S&P Global forecasts a 9.3% increase for softwood lumber in 2025, while plywood prices are expected to hold steady after falling 1.8% in 2024.
