ECONOMIC FORECAST
including private equity, remain quite aggressive in 
supplying capital.”
Housing doldrums
Speaking of lower interest rates, they can’t come soon 
enough for a major driver of construction activity and 
the nation’s economy: the housing sector. “Housing 
is in a funk,” said Yaros. “Single-family homebuilders 
are contending with a growing supply of unsold, 
completed new homes, as well as greater competition 
from the resale market and falling home prices in a 
rising number of regions.”
The high cost of money is not helping matters. “A 
significant increase in interest rates since the summer 
of 2022 has increased the monthly payments required 
from buyers of new or existing homes,” said Petryk. 
“They have also led to a significant market shortage 
because families who bought homes three to five-
plus years ago are loath to surrender their sub-3% 
mortgages.”
Mortgage rates have an important impact on the 
consumer attitudes that are vital drivers of the 
economy. While lower short-term rates may be 
coming from the Federal Reserve, it’s unclear how 
much effect they will have on the longer-term ones 
that apply to the funding of new homes. “I do not 
forecast mortgage rates coming down enough to 
make a big difference in single-family construction,” 
said Bill Conerly, Principal of his own consulting firm 
in Lake Oswego, Oregon (conerlyconsulting.com).
Wary builders. Reluctant sellers. Sluggish buyers. It’s 
all having an effect on the housing market. Oxford 
Economics expects starts to fall by 4.3% in 2025 and 
decline by another 2.3% in 2026 after dropping by 
3.5% in 2024. Prices for existing homes are expected 
to increase only 1.5% in 2025 and 2.3% in 2026 after 
rising by 4.4% in 2024. 
Concerned about the rising cost of living, consumers 
are cutting back on spending of all kinds. Their 
hesitancy affects the retail sector, which is an 
important driver and bellwether of the economy. 
“Our forecast for year-over-year retail sales growth 
is 3.8% for 2026, down from the 4.5% of 2025,” said 
Scott Hoyt, Senior Director of Consumer Economics 
for Moody’s Analytics (economy.com). Much of the 
increase in both years is due to inflation. “High prices 
are a bit of a mixed bag,” said Hoyt. “They undermine 
consumer purchasing power and confidence, but 
they also support nominal sales by lifting the prices 
of the goods retailers are selling.”
Construction woes
Outside of the single-family home market, contractors 
are having problems of their own. Multifamily builders, 
working through a backlog of units under construction, 
are hesitant to break ground on new ones. “I think 
we’ll see less multifamily construction in 2026,” said 
Conerly. “Vacancy rates are going up and rents have 
been coming down at the rate of about one percent 
a year.”
Meanwhile, contractors attached to the commercial, 
office and hotel markets are feeling the sting of 
a slowing economy, high interest rates, and an 
environment rife with uncertainty. “Many areas of 
non-residential are trending flat or edging down,” 
said Conerly. “Even the chip fabs, while still strong, 
are tapering down.”
The one bright construction sector: data centers. They 
show no signs of diminishing and are big customers 
for electricians, plumbers, and suppliers of scaffolding 
and manufactured products of all kinds. “When I look 
at the detail and the economic statistics of what kind 
Continued from page 9
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