Dodge Forecasts a Flat Year for Construction Starts in 2023
Adjusted for inflation, the metric will dip 3% next year.
The collision of housing demand and an imminent recession due to the Federal Reserve’s battle with inflation has Dodge Construction Network predicting that total US construction starts will be unchanged in 2023 at $1.08 trillion.
When adjusted for inflation total construction starts will dip 3%, it announced during its 2023 Dodge Construction Outlook last week.
Richard Branch, chief economist for Dodge Construction Network, said in prepared remarks, “The economy is slated to significantly slow, unemployment will edge higher, and for parts of the construction sector it will feel like a recession.”
Branch does not anticipate 2023 becoming a replay of the Great Recession about 15 years prior.
“Next year, residential construction, already reeling from rising mortgage rates, will continue to contract and will be joined by nonresidential construction as the commercial sector retrenches,” Branch said.
“Federal funds provided to the construction industry through recent legislation will counter the downturn allowing the construction to tread water. During the Great Recession, there was no place to find solace in construction activity – 2023 will be quite different.”
Multifamily Development Expected to Soften
Dodge also forecast deterioration in the multifamily sector, which it said has been reaping the benefits of the affordability issues plaguing the single-family market, pushing demand for space up and vacancy rates down to record lows.
“The softening labor market and investment outlook will eat away at these gains in 2023,” according to Dodge. “While the dollar value of multifamily starts will rise a scant 1% (-7% when adjusted for inflation), units will fall 9% to 723,000.