b'CONSTRUCTION FORECASTContinued from page 36sales are running at the top end of the range set inhow that will affect interest rates, which are already the decade preceding the pandemic, said Yaros.so high that they foreclose the possibility of many One reason is that a lack of existing inventoryprojects moving forward because they simply dont is pushing buyers to consider new homes. Thepencil out anymore.construction industry is stepping in to close the gap,Conerly advises keeping an eye out for two statistics and housing starts have exceeded expectations. that might indicate a pending downturn. One is The construction of new homes is being fueledany increase in initial claims for unemployment by a cold hard fact: There arent enough existinginsurance. Another is an inversion of the yield curve, homes to meet demand. The 3.1 months supply ofin which short term interest rates exceed long term existing homes remains well below the four to sixones.months of inventory that is considered a balancedWhatever the condition of the tea leaves, businesses housing market, noted Yaros. Strong demandingeneralwillencounteratougheroperating caused a 10.3% increase in the median price forenvironment in 2024, characterized by a need to existing homes in 2022, and a 0.6% increase infinesse a tight labor market and reluctant lenders. 2023. A correction of 1.1% is expected in 2024. In the coming year we will face uncertainty about For an explanation of the scarcity, look no furtherinflation and interest rates, shortages of labor, higher than the run-up in mortgage rates. The ultra-lowenergy costs, a slowdown in Chinas economy, and interest rates of existing mortgages amount to arecurring threats of a federal government shutdown, strong financial incentive for existing homeownerssaid Palisin. There are a lot of spinning plates in to stay put. Current homeowners had refinancedthe air, and some of them their investments at 3% or 4%, noted Bill Conerly,may fall and crack.Principal of his own consulting firm in Lake Oswego, Oregon (conerlyconsulting.com). Replacing what they had with better homes would require walkingPREPARE FOR A SOFT LANDINGaway from those mortgages to take on new ones atU.S. Gross Domestic Product 7%. I think well see this trend continue for another(GDP) Annual % Changeyear, but I think well also see a lot of strength in remodeling, and that will be financed probably2014: 2.3%with home equity lending or second mortgages. 2015: 2.7%Keeping watch 2016: 1.7%In the opening months of 2024, economists are advising construction companies to keep an eye on2017: 2.2%some key statistics to get an idea of how the year2018: 2.9%will turn out. One leading indicator the construction companies should look at is the level of permits2019: 2.3%issued for various construction activities, whether2020: -2.8% they are single family homes, apartments, or non-residential, said Basu. Another would be the2021: 5.9%Architecture Billings Index, which is a reflection of2022: 2.1%architect activity. If the architects and engineers are busy upstream, it means contractors will more*2023: 2.1%likely be busy downstream. *2024: 1.4%While construction companies tend to focus onEconomists predict slowing growth materials prices, which have recently been roughly flat, Basu said that the cost of money has a muchfor 2024.greatereffectonthebottomline.PaycloseSources: World Bank; *= projections attention to what Federal Reserve policy makersby Moodys Analytics.are saying about inflation early in 2024, and assess www.mrca.orgMidwest Roofer 37'