While 2025 may be coming to an end, economic uncertainty is expected to continue as concerns linger over the construction sector as well as the health of the wider economy.
“Consumer spending has stagnated, home sales have slowed considerably, and the labor market continues to weaken. Businesses, as a whole, have also been cautious about taking on new investments and expanding their excess activities,” said Sarah Martin, associate director of forecasting at the Dodge Construction Network. “As market participants and consumers become accustomed to high levels of uncertainty, they will become more active; however, borrowing costs will increase through risk premiums, making investment more difficult.”
Dodge’s data shows that while projects are being planned, the period before they start has lengthened. In September, the average number of months a nonresidential project spent in the planning stage reached 19 months, according to Dodge. However, says Martin, “recent trends show improvement, with the average falling to 16 months in November. Taken together, the data suggest that increased uncertainty and deeper labor shortages in the construction sector will produce weaker growth in 2026.”
Overall, Dodge reports that starts were up 5% year-to-date through November. In the residential sector, starts are down 5% in that period, which Martin notes is due to a “significant pullback” in single-family construction, at a rate of 13%. “While mortgage rates fell to 6.24% in November, the high risk of recession and economic uncertainty continues to keep homebuyers on the sidelines,” he says. “Slower demand has contributed to house price declines, driving slightly better affordability that could spur some buying activity on the margins, but not much.”
While single-family construction fell, multifamily construction rose 12% through November. “As buyers continue to be priced out of the single-family market, rental demand will remain, or buyers will opt for more affordable townhomes or condos.”
According to Dodge, non-residential starts rose 5% in the first 11 months of the year. Office starts, which include data centers, are up 41%, while retail and parking lots are up 8% and 12%, respectively. Weaker markets included hotel construction, which fell 1% in the same period, and warehouse starts, which fell 7%. Manufacturing is down 8% through November as “the shift in tariff policies increased risks around higher input costs and supply chain issues, creating a sharp pullback in the first quarter of 2025,” says Martin. While the sector rebounded in the second quarter due to the shutdown of large semiconductor plants and petrochemical refineries, he adds, starts fell 71% in the third quarter “as tariffs went back up.”
Rebar prices are expected to end this year up 5.8% before falling 2% next year, according to S&P Global Market Intelligence’s fourth-quarter forecast. Sheet metal prices are up 3.8% in 2025, with another 2.1% rise expected in 2026. “US prices have room to decline after tariff-driven increases,” says John Anton, director of pricing and purchasing at S&P. “In Asia and Europe, prices are close to costs and will lead to a moderation in production that puts upward pressure on prices.”
He adds: “Factories were able to drive price increases following the June increase in Section 232 tariffs from 25% to 50%. However, we expect soft global demand and the domestic premium over imports plus tariffs to reduce leverage for domestic suppliers.”
In the lumber market, S&P forecasts a 3.2% decline in softwood prices in 2026, after a 4.3% increase in 2025. Plywood prices are expected to end the year down 1.5%, rising 1.4% next year.
