According to Dodge Construction Network, although the Federal Reserve started cutting interest rates in the second half of the year, overall construction growth in 2024 was relatively modest. Richard Branch, the chief economist at Dodge, pointed out that construction starts have been moving sideways with little progress despite the initial rate cuts in September and November. The queue of planned projects is large, but developers seem concerned about the economic outlook in the new year and reluctant to move projects forward.

Uncertainty and Incoming Administration

Some of these concerns are fueled by uncertainty due to the incoming administration. Branch noted that the top concern for developers is likely the uncertainty surrounding tariffs and immigration enforcement promised by President-elect Trump. If these measures are implemented, they could offset the benefits of lower interest rates and delay projects even further.

Residential Starts

Through the first 11 months of the year, residential starts increased by 8%. However, after a strong start, the growth in the single-family sector has slowed. Branch attributed this to the high mortgage rates. On the other hand, multi-family starts "remain in the doldrums." But an uptick in the planning stage suggests that this market could see some growth next year. In October and November, the largest multi-family projects to begin were in New York City - the $637-million Utopia Living apartments in Flushing, Queens and the $384-million Frederick E. Samuel apartment renovations in Manhattan.

Non-residential Starts

Non-residential starts rose 4% overall through November. Among them, institutional starts saw the largest increase of 17% year-to-date, mainly due to growth in health care, transportation, and sports/recreation projects. In the commercial sector, data centers and hotel work drove starts, with a 5% increase year-to-date. The most prominent non-residential projects to start work in the last two months were the $2.2-billion Henry Ford Hospital Tower in Detroit and the $1.4-billion third phase of the LG Electric battery plant expansion in Holland, Mich.

Non-building Sector Starts

Branch stated that starts in the non-building sector "remain reasonably robust," with a 5% increase through November. Environmental public works and pipeline markets have been strong, while utility starts fell 16% year-to-date. However, when excluding the utility category, non-building starts overall would be up 13% in the same period. In the past two months, the largest non-building projects to break ground were the $2.8-billion Central Everglades Reservoir Embankment project in Palm Beach County, Fla., and the $1.6-billion Haynesville natural gas pipeline across 255 miles in Louisiana.

Spikes in Lumber Prices

S&P Global's fourth quarter forecast predicts that softwood lumber prices will fall 3.5% overall in 2024, reducing the 6% decline expected in the third quarter forecast. Luke Lillehaugen, the senior economist at S&P Global, said that spot prices for softwood lumber have spiked in recent months to levels not seen since 2022. Price growth has been driven by factors such as continued supply tightness, the start of interest rate cuts by the Federal Reserve, and political developments related to the U.S. election and speculation about possible tariffs. S&P Global forecasts a 9.3% increase for softwood lumber in 2025, while plywood prices are expected to remain flat after a 1.8% decline in 2024.