Taking stock of the construction industry and making forecasts for its future, three chief economists got together to share their insights and answer questions via webcast last week. Bernard Markstein from Reed Construction Data, Kermit Baker from The American Institute of Architects, and Ken Simonson from the Associated General Contractors of America all discussed how residential and commercial construction indicators and sectors have behaved over the past year as well as what they see happening in the future. The majority of the presentations covered many of the same details we've been hearing for a while-that housing normally leads the country out of a recession and its recovery looked promising at the end of 2009, but has since dropped or remained stagnant in most major markets. However, the speakers all mentioned a few hopeful points on the horizon.
Economists like comparing supply and demand and, as Markstein notes, although housing starts and sales continue to decline or stall, we're way below long-term need. Such low supply means that when the demand finally comes out of hiding, things should improve quickly. Simonson adds that when housing does jump it should be a significant increase because there's a lot of pent-up demand. Multifamily construction already looks better with a 13 percent increase in construction activity, and he expects that sector to continue to grow over the next year.
Baker spent the most time focused on residential markets, especially single-family housing. He agrees that the production level for housing is the lowest it's been in decades, so we're poised to recover in terms of low supply. He also points to strong remodeling figures, which have held steady throughout the entire downturn and have grown in areas of energy efficiency and renovations of distressed properties. Baker also sees improvement in certain local markets, and he talked about what conditions are needed to spark the big housing recovery that everyone has been expecting. Although most national indicators aren't moving forward, he says, we are seeing regional patterns of recovery particularly in the Northeast and Texas corridors-areas with a strong population base. And eventually that trend will spread.
As for future national growth, Baker points again to pent-up demand for long-term answers. He thinks once young adults start moving out on their own and the immigrant population begins to grow again that we'll see housing begin to enjoy long-term healthy activity. Mainly, Baker feels we simply need confidence in our national fiscal stability and growth. “We already have low mortgages and reasonable prices. We just need confidence that the economy is improving and that people are going to have their jobs, and once we get those conditions in place we'll see a healthy recovery in housing.”