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Construction boom will prevent Fed from lowering interest rates
Construction is usually one of the first industries to experience layoffs when interest rates rise. However, many construction companies have more than a year of work booked. The strength of the construction industry will make it harder for the Fed to justify lowering interest rates.
There has been a $50 billion decline in residential construction in the past year. Millions of homeowners have locked in low mortgage rates, and most will refuse to sell their homes. Persistent issues with regional and local banks continue to result in less financing for projects. Construction financing is twice as expensive as it used to be. The rate of rent increases has slowed, or even reversed in some markets, so it is difficult for landlords to offset interest costs with rent increases.
The decline in residential construction is more than offset by commercial construction for things like highways, hotels, and hospitals. $108 billion was spent building factories in 2022. This year, the amount spent on factory construction is at an even higher rate than 2022.
Works Cited:
https://www.wsj.com/articles/the-building-boom-is-prolonging-market-pain-b224eb74?mod=hp_lead_pos1
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