You don’t have to be Albert Einstein to see the writing on the wall. The country is on the verge of a recession or may already be in one, depending on who you talk to. The Federal Reserve continues to raise interest rates, and mortgage rates follow suit. Renowned billionaire financier Carl Icahn says there “very well could be a recession or even worse.”
The market size of the U.S. construction sector was valued at $1.59 trillion in 2021, according to Statistica. That’s a lot of hammers and nails! It won’t be that big this year because of inflation and rising mortgage rates, but it’s still thriving.
The cost of building a new home goes up every day. The average cost of building a 2,000 square feet home is $350,000. In 2020, it was $240,000.
The price of construction materials is skyrocketing. Lumber prices are up more than 135% since 2020, and lumber price swings alone have pushed the average price of a new home up by more than $18,000, according to the National Home Builders Association.
Plus, just delivering products to a new home can put you in the poorhouse. The price of diesel gas is the highest in history. So why is the home builder and contractor business still going strong?
The demand for new homes is cooling off but it hasn’t gone cold. Deep pocket builders like Lennar and D.R. Horton are behind a lot of the new construction, and they haven’t been affected by the financial crisis – yet.
Plus, big Investors and corporations like Blackstone, Zillow and Bedrock are building new homes and gobbling up houses like there’s no tomorrow. And many custom home builders are paying with cash. All these reasons are keeping builders and contractors busy. But the average home buyer and first-time buyer are being left in the sawdust.
One of the biggest reasons builders and contractors are doing so well is that former buyers have changed their plans. They’ve put off the buying their dream homes and are now renovating, restoring, or remodeling their current homes. According to Screenmobile, the house restoration firm, U.S. home renovation business accounts for well over $400 billion in annual revenue and is projected to reach $510 billion by 2024.
That is why – while the real estate market may be faltering, and a recession may be looming, the home builder and contractor business is still going strong.