This early in the year, 2022 is fast shaping up to be one of the most interesting periods in the construction industry yet. In many ways, we can expect more of the same trends and factors that have characterized the past few years: rising prices, spiraling interest rates, and off-the-chart demand. To the casual observer, it might even seem that 2022 will pretty much be a rehash of 2020 and 2021.
That being said, there are bound to be some developments that haven’t been seen or felt in the industry, at least not during the past several years. Every bit as significant in influencing prices and shaping buying and selling trends, these factors will likely make their effects felt in the near future.
One thing that will remain constant is the need for property owners and developers to protect their investments against risk exposures and potential liabilities. Property insurance, builder’s risk insurance, and even personal liability will continue to play a crucial role in ensuring that owners and builders remain protected against unforeseen incidents that can cause damage and losses.
Apart from that, everything else is a toss-up as far as the future of the construction industry is concerned, at least when it comes to the coming year. The frenzied growth that has characterized much of the second decade of the millennium continues on and shows no sign of ending any time soon. So, if you’re eager to know what 2022 has in store for the construction world in general, here are some of the most significant factors that will likely shape the coming year:
1. Demand for housing will continue to increase
All indications point to a continuing increase in the demand for houses. Even as prices continue to go up, buyers remain undaunted in their quest to purchase new homes. This is somewhat surprising, especially for those that have been closely watching the housing market boom caused by the pandemic.
House prices seemed to have settled at around $379,000. Even so, the 6-month peak of 507,000 units registered in September of 2021 signifies a trend toward continued purchases. Even with the supply and labor issues that continue to dampen the industry, this indicates that builders have discovered ways to make the best of the situation.
2. Labor and supply will remain problematic
Another bit of bad news is that supply chain and labor issues will continue to hound the industry over the next year. The good news is that these problems probably won’t reduce the demand for new houses among buyers in the same way that they didn’t affect the market in 2021.
Just as the demand for houses remains robust, prospective owners don’t seem to be discouraged by the relative shortage of completed homes. In fact, current data shows a 27% increase in the sales of housing units that haven’t even been constructed!
Of course, the sluggish pace caused by supply and labor issues will continue to be a problem. Nevertheless, supply chains will likely loosen up as COVID-19 eases its stranglehold on the industry. Builder prices also aren’t increasing as fast as they did early last year, which is a surprising but welcome development.
3. The effects of inflation will continue to be felt
Finally, inflation will continue to be a significant factor affecting various areas of the construction industry. In particular, stakeholders will have to pay close attention to how future trends will be affected by inflationary methods that influence the economy.
One of the most crucial of these is the Consumer Price Index (CPI), which essentially determines the value of products and services that consumers place when purchasing them. These primarily include coffee and gasoline, but many other goods and commodities will likely be affected as well.
The flipside of the coin is the Producer Price Impact (PPI), which determines inflation rates of the manufacturers of these products and services. Although these inflationary measures have risen over the past year, analysts expect the PPI increase to ease and then gradually decline in the coming year, with the CPI following the same trend soon after.
The takeaway
Perhaps the most important realization that one can take from all this is that the demand for houses will likely remain high throughout most of 2022 and beyond. Even the sluggish timelines and inevitable delays won’t deter buyers new and old, who based on previous data and statistics are quite tolerant of such factors.
We can also expect to see a softening of producer price impacts across the board as the COVID-19 pandemic slowly but surely eases up. And barring any major weather-related disasters, there hopefully won’t be a repeat of the supply chain issues that wracked the industry in 2020.
About Snyder Specialty
Snyder Specialty, LLC is a New York-based underwriting facility that provides a range of property and liability solutions for personal and commercial lines. Specializing in coastal properties and hard-to-place risks, Snyder Specialty expands your current capabilities with proven solutions for complex risks. Find out more about the company’s range of services by calling (718) 362-8039.
