Coronavirus and the construction markets


The global spread of the coronavirus has created uncertainty across the economy, including in construction markets. As states shutter “non-essential” business activity, economists at the National Association of Home Builders (NAHB) estimate that approximately 40% of GDP is “on pause or partial pause.”1 While news outlets have reported the closing of key construction projects in certain cities, the story in the construction sector varies by geographic area. Places like California and New Orleans, for example, issued shelter-at-home orders, but currently identify construction as an “essential” business. The Associated General Contractors of America (AGC) surveyed members last week and found that only 28% had been instructed by a government agency or official to halt or delay an active or soon-to-be active project.2

The global disruption is clearly impacting the economy. Based on data from other countries, NAHB analysts assume this period could last for about eight weeks. As a result, most anticipate a sharp downturn in Q2, forecasting a -11% GDP growth rate, and overall negative growth for the year. While the most dramatic impacts are being felt in the restaurant and hospitality industries, residential construction is also impacted. As the unemployment rate rises, demand for new housing will, in the short term, decline. Unlike in other sectors, however, experts suggest that pent up demand in housing is often deferred, not lost.

Federal and state officials are considering many policy initiatives currently that will help the market. The Federal Reserve has lowered rates and taken action to ensure liquidity in the markets. The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, is providing payment forbearance to borrowers impacted by the coronavirus.3 Fiscal stimulus measures being debated by Congress should also help contractors and small business with cash flow concerns.

1NAHB, “Viral Economic Stress: Impacts of the Coronavirus” – March 20, 2020 
2AGC, “AGC Member Coronavirus Survey Results” – March 20, 2020
3FHFA, “FHFA Suspends Foreclosures and Evictions for Enterprise-Backed Mortgages” – March 18, 2020

Featured Articles