Expenditures for residential building construction and improvements nationwide will rise between 6% and 16% per year through 2014, climbing in constant dollar value from $274.57 billion this year to $416.01 billion in 2014, the management consultant and investment banker FMI Corp. predicted Friday.
Spending on single-family residential building will go up 10% to 24% per year, rising from $123.61 billion in 2010 to $232.67 billion in 2014, the Raleigh, N.C.-based group said.
In contrast, it predicted spending on multifamily buildings would drop 12% this year and 8% in 2011 before turning around in 2012 and rising 28% that year, 8% in 2013 and 9% in 2014. In constant dollar terms, the annual expenditures would go from $31.34 billion in 2010 to $43.31 billion in 2014.
As for improvements--which FMI defined as additions, alterations, and major replacements, but not maintenance and repairs--FMI looks for 3% to 5% growth annually, from $119.72 billion this year to $140.03 billion in 2014.
All these forecasts reflect the value of construction put in place. The Census Bureau defines that measure as the value of construction installed or erected in a particular year. The number includes cost of materials as well as cost of labor, contractor's profit, the cost of architectural and engineering work, and various other costs.
"The residential sector is expected to begin to recover in 2010," FMI said, but it noted that "single family put in place construction will recover at a slower rate than single-family housing starts." This is because there's a trend toward lower-cost housing. For instance, it takes five starts on $150,000 houses to equal one start of a home worth $750,000.
"Multifamily construction has been impacted severely by tight credit and will not recover until credit loosens," FMI continued. "Residential improvements construction is expected to increase slightly in 2010 as consumers make improvements rather than move up, and the age of the housing stock requires improvements."
Craig Webb is editor of ProSales magazine.