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After getting hit by the Federal Reserve interest rate hikes, the housing construction market in the United States is showing signs of recovery and potential growth in H2 2023. The single-family homebuilding projects in the United States, in May 2023, reported the most increase in more than a year. According to data released by the Census Bureau, housing starts came in far beyond the expectation of a decline of 0.1%.
In May 2023, the number of housing units saw a notable increase, reaching a seasonally adjusted annual rate of 1.631 million. This figure surpassed both the expected 1.40 million units and the revised estimate of 1.34 million units from April. Similarly, building permits, which indicate the authorization for new housing units, rebounded in May following declines in March and April. Compared to the revised April rate of -1.5%, permits rose by a substantial 5.2%.
The nearing conclusion of the Federal Reserve's tightening cycle brings positive implications for the future housing construction market in the United States. Particularly, it is expected to have a favorable impact on mortgage rates and the cost of financing for developer and builder loans. Heading into H2 2023, ConsTrack360 expects the residential construction market to post a strong growth recovery in the United States. The fact that builders and developers are also pulling back on their sales incentives is an indication that the industry remains in a healthy state in the North American market.
Other construction sectors have been faring well too in the United States in 2023. The factory construction value has reached a record high on the back of growing investment from domestic and foreign manufacturers following incentives for US-made chips and EVs.
VinFast, the Vietnamese EV maker, also announced that the firm is commencing the construction of its US factory in July 2023. The US$4 billion worth of project will enable the firm to further push its presence in the United States. The firm, notably, announced the plan for the US factory in 2022 and is targeting production in 2025. In the first phase, the firm is investing US$2 billion in building a factory capable of producing 150,000 vehicles per year.
The surge in factory construction activities aligns with the implementation of the CHIPS and Science Act. This crucial legislation provided an enormous funding injection of US$280 billion, specifically intended to strengthen semiconductor manufacturing within the United States. Furthermore, the anticipated impact of the Inflation Reduction Act is expected to provide additional support for factory construction projects in 2023 and beyond, further contributing to the growth and development of the construction market.
Overall, ConsTrack360 maintains a steady growth outlook for the construction industry in the United States over the next five years. Based on ConsTrack360’s estimates, the industry is expected to grow at 6.1% to reach US$1.4 trillion in 2023. From 2023 to 2027, the market is expected to grow at a compound annual growth rate (CAGR) of 5.2%, during which the industry output is projected to reach US$1.7 trillion by 2027.
To know more and gain a deeper understanding of the construction market in the United States, click here.
