FMI’s Residential Construction Outlook

As management consultants to the construction industry, FMI annually provides a detailed look at the health of the industry. This year’s U.S. Markets Construction Overview also provides sector-by-sector analysis.

For the residential sector, after five years of rapid growth, says FMI, the residential markets are poised to level off. Total housing starts in 1999 reached 1.66 million units, representing a gain of 22.8% since 95. For 2000, it estimates that starts will decline to 1.57 million units and will be at 1.47 million units for 2001.

The value of residential put-in-place construction, however, will continue to grow slightly. Construction totaled $321.4 billion in 99. The estimated value for 2000 is expected to be $333.4 billion, and $337.8 billion for 2001.

This growth in value is due to increases in home size, the addition of more amenities, and rising new home prices. The median new home price was $159,800 in 99. By the first quarter of 2001, FMI reports that it is expected to increase to $180,000.

Single-Family Market

The single-family housing market had put-in-place construction totaling $212.7 billion for 99. This was the fourth consecutive year of significant gains, FMI says. But this growth is predicted to flatten out at a high level through 2000 and 2001. Forecasts indicate that single-family construction will grow to $222 billion in 2000, an increase of 4%, and to $224 billion in 2001, an increase of 1%.

Single-family housing starts increased to 1.332 million in 99, a gain of 4.7%. Starts for 2000 are forecast to drop 7.1% to 1.237 million units. For 2001, starts are expected to decline another 7.3% to 1.147 million units.

However, FMI notes, the trends driving higher new home prices will continue, which will keep total put-in-place value relatively flat.

The Department of Com-merce’s Bureau of Economic Analysis has estimated local population growth through 2010. According to its figures, the top five metropolitan areas in population growth are shown in Table 1.

Other metro areas that should see high percentage gains in population are Minneapolis-St. Paul, MN; Orlando, FL; and Sarasota-Bradenton, FL.

Multifamily Market

The value of new multifamily construction has been gaining each year since 1993. It reached $30.5 billion in 99, an 11.1% increase. FMI estimates that multifamily construction will slow somewhat from this high rate.

Multifamily construction will see anticipated growth of 5.9% in 2000, taking it to $32.3 billion. It will grow 3.4% in 2001, climbing to $33.5 billion.

On a housing starts basis, the multifamily market decreased 4.1% to 331,000 starts in 99. For 2000, starts are predicted to increase a slim 0.5% to 333,000. They are then expected to slide down 4.5% in 2001, to 318,000 units.

Improvements Market

Additions and alterations are nearly one-quarter of all residential construction expenditures. FMI says that the residential improvements market is likely to continue to benefit from the strength of single-family housing construction in recent years.

Residential improvements were at $78.2 billion in 99, an increase of 1%. Improvements are expected to rise to $79.1 billion in 2000, and then grow to $80.4 billion in 2001.

For more information, FMI can be reached at 919-787-8400; www.fminet.com (website).

Publication date: 12/18/2000