How COVID-19 is affecting U.S. Construction and Housing
iBDC is closely monitoring the COVID-19 crisis and providing our clients with the most updated news and trends in the building sector and window and door industry.
COVID-19 is confronting every level of the U.S. economy with an unprecedented challenge. The U.S. has seen more than 13.6 million reported cases as of December 2, 2020—a number that is rising every day. While the U.S. government and companies in all sectors and industries are adapting to a ‘new normal’ as fast as possible, much remains to be done.
Construction is a major contributor to the U.S. economy and during the pandemic, the construction industry matters more than ever. From building healthcare facilities for coronavirus patients to manufacturing and donating lifesaving equipment, the construction sector and window and door industry have played a critical role in responding to the crisis and in the recovery.
Although construction remains strong, it is not exempt to the effects of the pandemic. Project schedules have suffered from changes and delays as a result of labor falloffs in construction and other sectors along with temporary job site shutdowns that sprung up earlier in the year. Supply chains that fuel the sector have also been constrained, including the window and door industry, leading to material input delays in some cases. With recovery underway, despite COVID-19’s resilience, we must consider the lasting impacts that the pandemic will have on the building industry, and what that will mean for the future of the construction sector and window and door manufacturing.
Construction Sector Response to COVID
The pandemic is transforming how buildings in the hospitality industry and commercial buildings are designed and built. Owners and developers are putting a greater emphasis on health-related features such as high-performance ventilation systems, open-air architecture and antimicrobial finishes to ensure guests’ wellbeing and safety. Many building developers and architects have been pushed to adopt health-conscious ideology, the benefits of which could remain long after the outbreak fades.
We see that as construction remains stable and project growth continues, more jobs will involve replacing window and door hardware and other high-touch surfaces with hard, antimicrobial and antibacterial finishes. Additional jobs might involve ramping up outdoor seating, dining, and work areas for guests of hotels and restaurants. Meanwhile, the health crisis has caused an uptick in health and medical facility construction and better equipped nursing homes. Total healthcare construction spending is up 6% from 2019.
Residential Housing Market Response
Mortgage interest rates have set record lows more than a dozen times in 2020, and homebuyers and homeowners are pouring into the opportunity. As of the end of November, mortgage applications in 2020 were up 55.3% compared to the same period of 2019, according to the Mortgage Bankers Association. Low rates triggered mortgage demand to jump for both refinancing (up 86.1% year over year) and home purchases (up 16.5% year over year). After the sudden sharp drop in the second quarter of 2020, when COVID caused temporary shutdowns across the U.S., the housing market heated up and has not slowed down since. The robust market has been fuelled by pent up demand from the spring months and insufficient housing supply combined with buyers wanting to seize the lowest mortgage rates on record. We have seen a sharp rise in the sales of new single-family homes, which are up over 20% in 2020 compared to 2019, pushing the sales rate to its highest level in 14 years. The luxury segment recorded a promising uptick in demand (up 41.5% overall in the third quarter). Existing home sales for homes priced above $1M were up over 100% year over year, but this segment of the market represents only about 5% of the total number of homes sold in 2020. However, unlike other markets, luxury home inventory levels have actually increased since 2019, at a rate of 8.4%.
Housing markets across the U.S. are also experiencing a shift from urban cores to suburban areas—a trend that remained consistent through the third quarter of 2020. By moving away from densely populated metro areas, homebuyers can acquire more space for less money, which is an extremely valuable proposition in 2020. Homebuyers’ growing preference for moving toward suburban areas is clear, especially in the single-family market.
In addition to bringing homeowners out of urban areas, COVID-19 has provided stimulus for upgrading existing homes to better suit them for work-from-home conditions. Homeowners are taking advantage of refinancing at lower interest rates and freeing up money for upgrades and remodelling. We are set to see a shift in new home design and home improvements—bigger outdoors spaces, indoor-outdoor living concepts, and better ventilation in homes, apartments, and condos. These changing design ideas will be met with increased production demands for more innovative window and door solutions and other building products going forward.
The COVID-19 pandemic has reinforced the strength of the housing market as it remained fundamentally intact, unlike what was experienced in prior downturns. Housing in general has been stable and is one of the main sectors leading the charge toward recovery in the U.S.
What to Expect in the Future?
Economic stimulus from the government has already been proven effective in propping up the U.S. economy as businesses struggle from restrictions and closures and many Americans are still without jobs or working in reduced capacity. The first round of stimulus provided a massive boost to personal disposable incomes and spending, and the PPP program provided over $65 billion to the construction sector. Going into 2021, the expediency of a COVID- 19 vaccine distribution and the approval of another round of government stimulus will be crucial to sustaining businesses, especially those in construction, that rely on industries that have been hardest hit by the pandemic and have a longer road to recovery.
Moving forward, the construction sector overall will continue to play a vital role in a post-pandemic recovery of our communities and other sectors like manufacturing. The window and door industry in particular can expect to see growing demand to keep up with elevated levels of homebuilding and larger construction projects. As COVID has changed the perception of living and working space along with health-conscious design and building, there is a need for continued innovation in the window and door industry more than ever. While the pandemic has undoubtedly transformed the way we live and work, the challenges and adaptations that the industry faces also opens a door (or window) to new opportunities.
