The recent impact of the COVID-19 pandemic is being felt around the world. Construction and engineering projects are being affected in many ways. Since this type of crisis is new to everyone, adjusting to the COVID-19 marketplace has not been easy. The global impact of COVID-19 on the construction industry is expected to evolve as the situation with the disease evolves. The US construction industry is experiencing challenges with construction material supply chain disruption, labor shortages, and the shutdown of construction sites. As a result of the slowdown in economic activity caused by the pandemic, the new construction home market has seen a sharp decline.
The coronavirus pandemic is causing major economic disruption on a global level. It is affecting households, financial institutions, businesses, and markets. Although it is still early to accurately predict the potential consequences of the pandemic for economies, both national and global, the current crisis is expected to have a more severe impact than the 2007/2008 global financial crisis when property prices decreased sharply as the housing bubble popped.
The impact of COVID-19 on the construction business
This spring, the new construction home market recorded its biggest monthly decline in over 35 years. The crisis has affected both material and labor, which are essential components of a construction project. The impact of the global health crisis only started to be felt at the end of March and the decline in new home construction projects was led by multifamily buildings.
Housing supply was already tight before the virus outbreak, and the pace of new construction was already slow. The uncertainty the pandemic brought made many people reconsider their decision to buy or sell. Some buyers lost their jobs and the ability to purchase a home. Some homeowners postponed selling during the pandemic, while others took their homes off the market and decided to stay where they are and renovate instead of selling their property. This April, home sales were about 18% lower than they were last year. The decrease in sales was particularly sharp in the West.
Construction material supply chain disruption
The progression of some new home construction projects is being impeded due to the delay in the supply chain. Different regions are suffering from varying degrees of impact, depending on urban density, healthcare availability, and other factors.
Many international suppliers and logistics companies have stopped their operations due to COVID-19. Contractors across the country are expressing difficulties in obtaining certain construction materials. Various goods, including aluminum, steel, copper, stone, and fixtures, are shipped to the US from foreign suppliers, mostly Chinese. US firms that rely heavily on China for their construction materials are experiencing problems with their construction material supply chain.
As the crisis continues, the US can expect more disruptions in imports. To overcome this inconvenience, US manufacturers are trying to rely less on imports and strengthen their supply chains with domestic materials and commodities.
By now, many Chinese suppliers have resumed operations, but with a reduced number of workers. The delivery of Chinese-made materials usually takes at least three weeks, and it is going to take even longer in the coming months as the number of orders increases.
Due to the reduced availability of construction materials, national prices of high-demand goods such as copper and aluminum are increasing. A direct consequence of construction material supply chain disruption is the slower progress of many new construction projects. In addition, building permits, appraisals, inspections, and title searches, also take longer than usual.
A shortage of skilled labor
A shortage of skilled labor is another reason behind the new construction home market decline. On the one hand, the safety of employees and their families is a priority. On the other, some sense of normalcy must be maintained even in these difficult times.
In most states, housing is considered an essential business during the pandemic, which helped many residential construction workers keep their job. Still, many construction industry employees lost their jobs due to the pandemic. New construction is needed to completely restore the housing market to its pre-pandemic levels, but the loss of construction jobs may delay the recovery.
In an attempt to contain the spread of COVID-19, emergency measures and protocols have been implemented in the US construction industry. One of the most drastic measures is the city-wide and state-wide ban on non-essential construction activities. Furthermore, companies are forced to form smaller teams so as to enable physical distancing. Workers are spread out on the site, which slows down the construction pace. In addition, many construction companies, site owners, and contractors have introduced travel bans for employees originating from high-risk areas.
New construction home market is awakening
In May, the stage was set for continued housing recovery that is expected to happen over the summer. The new construction home market is still well below its pre-pandemic levels, however, it is starting to show signs of stabilizing and recovering from the coronavirus pandemic. The supply of existing homes is low and is continuing to shrink fast. Interest rates and are historically low, which is helping homebuyers afford pricier properties. Many states are lifting restrictions on home tours and buyers are feeling more comfortable visiting properties in person. Experts who follow the real estate industry predict steady improvement in the coming months. Everything points to a strong future market and gives us enough reason to be optimistic about the home building sector.
Clarissa Johnson is a freelance writer and small business owner. She currently writes for Verified Movers. She constantly monitors the US housing market and keeps herself in the loop by reading and writing reports about current events.