b'YOUR TOOLKIT FOR BUILDING EXCELLENCEdeclining, are still at the highest levels since 2022.the Federal Reserve shifts its focus from fighting Costs for materials and supplies are increasing.inflation to bolstering employment. We look There is uncertainty about the nations future tradefor inflation to peak at just above 3% when 2025 policy. Lower and middle income consumers,numbers are finalized, and for the Fed to cut nervous about inflation, are tapped out and closinginterest rates into 2026 until the federal funds rate their wallets. Against such headwinds, a hostfalls to about 3%, said Yaros. That rate, while of otherwise attractive projects can look lessmuch higher than the rates of early 2022, is a promising. considerable improvement over the 4.3% of mid-One might also expect business profitability to2025.suffer. Yet Oxford Economics expects it to followDeclining interest rates, which encourage the the same general pattern as the GDP. We looklaunch of new projects, are also a reflection of for corporate profits to rise by 4.9% in 2026, saidlooser pockets on the part of the nations lenders. Yaros. Thats up substantially from the 0.5%Credit conditions have improved significantly for expected when 2025 numbers are finalized. Evenbusinesses, said Basu. Companies with strong so, the 2026 pace remains slower than the 7.9%balance sheets will find bankers very willing to clocked in 2024. supply debt. We also know that equity investors, The expected 2026 rebound in profitability stemsincluding private equity, remain quite aggressive in from a belief that stimulus from Washington willsupplying capital.lift all boats. We believe the passage of the OneHousing doldrumsBig Beautiful Bill, with its tax cuts for businessesSpeaking of lower interest rates, they cant come and households, should help the economy regathersoon enough for a major driver of construction some steam in early 2026, said Anirban Basu,activity and the nations economy: the housing Chairman & CEO of Sage Policy Group (sagepolicy. sector. Housing is in a funk, said Yaros. Single-com). The legislations 100% bonus depreciationfamily homebuilders are contending with a should help fuel business investment, while largegrowing supply of unsold, completed new homes, tax refunds should invigorate consumer spending.as well as greater competition from the resale Both activities are important drivers of the nationsmarket and falling home prices in a rising number economy. of regions.This stimulus from Washington is arriving at theThe high cost of money is not helping matters. same time companies are getting a more solidA significant increase in interest rates since footing on the nations shifting trade policy.the summer of 2022 has increased the monthly There has been a bit of a shock to the systempayments required from buyers of new or existing in and around tariffs over the past year, and it ishomes, said Petryk. They have also led to a taking some time for many operators to understandsignificant market shortage because families who their impact, noted Andrew Petryk, Head ofbought homes three to five-plus years ago are loath Industrials at Brown, Gibbons Lang & Company,to surrender their sub-3% mortgages.an investment banker (bglco.com). Specifically, companies have responded to ChinaMortgage rates have an important impact on the tariffs by sourcing imports from other countriesaconsumer attitudes that are vital drivers of the move which has also lent succor to the nationseconomy. While lower short-term rates may be recent supply chain ills. Lead times havecoming from the Federal Reserve, its unclear diminished as companies have found alternativehow much effect they will have on the longer-or additional suppliers, said Petryk. Those thatterm ones that apply to the funding of new homes. relied on one or two vendors now have three, fourI do not forecast mortgage rates coming down or five. enough to make a big difference in single-family construction, said Bill Conerly, Principal of his Businesses should also benefit from a decline inown consulting firm in Lake Oswego, Oregon the cost of money over the coming months, as(conerlyconsulting.com). continued on page: 36 FRAME BUILDER - VOL6 6 / 35'