Home Building Construction Accelerates in the Suburbs
Construction is one of those industries that tend to move in waves, getting a lot of work done during the warm summer and early fall months, and slowing down during the colder winter months. Of course, as we moved into the busy summer season of 2020, we were also sidelined by a global viral pandemic that threw a wrench into pretty much everything.
In June and July, things started to turn around in spite of the need for things like masks and social distancing. What changed in the housing market and why does home construction seem to be accelerating during the second half of the year?
Growth in the Construction Market
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Most of the world is slowing down and in the early months of the year, the construction industry was no different. We all tried to find ways to cope with the global pandemic, from lockdowns to social distancing and wearing facial coverings. In some parts of the world, construction companies fell under the essential blanket and were able to continue business as usual. In these areas, they had to contend with floundering economies and home buyers losing their income.
In the rest of the world, construction got classified as non-essential, leaving them with closed doors, furloughed employees and contracts unfulfilled. In July, that changed — must to the surprise of everyone involved. Contracts breaking ground on new houses increased by 22.6% in July alone. Not only is this the biggest gain of the year, but it's also the biggest industry gain since October of 2016. What's sparked this shocking growth?
Sinking Interest Rates
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The global economy is taking a hit thanks to the pandemic that's leaving millions of people out of work around the world. In the United States, at least, the Federal Reserve is taking steps to bolster the economy and help people who might be interested in buying or building a home, even in these uncertain times. First, they cut mortgage interest rates, dropping the federal funds rate to nearly 0% where it will remain until banks are sure that the economy has returned to some semblance of normality after the pandemic gets resolved.
This is a small part of the federal infrastructure support that we're seeing in the United States. Currently, more than 85% of Americans support federal investment in water infrastructure, and other forms of federal involvement will continue to protect the economy and the construction industry. These low-interest rates are making it easier and more accessible for first-time homebuyers to purchase or build their dream home, but what does this have to do with the suburbs?
Getting Out of the City
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Living in close proximity to one another makes it easier for things like the coronavirus to spread. New homeowners aren't looking to buy property in cities or other crowded areas, which is leading to this construction boom in the suburbs. The growing number of careers moving to remote work means that there's no need to spend an arm and a leg to live in the city to keep your commute low. You can live anywhere and still log in to your zoom meetings or business VPN without ever needing to leave the house — or put on pants.
This is turning into quite the boon for the construction industry as people moving out of the city are in desperate need of new homes — and they're more than willing to pay extra to build the home of their dreams.
Riding Out the Pandemic
We're still learning to navigate this new normal, but for companies in the construction industry, now that the slow-downs of the beginning of the year are over things are starting to look up.
About the Author: Emily is a green tech writer who covers topics in renewable energy and sustainable design. You can read more of her work on her blog, Conservation Folks.
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