SCHAUMBURG, Ill. The long-bedraggled U.S. construction sector might be showing signs of life, but more needs to be done about the nations crumbling infrastructure, according to one economist.
Residential and nonresidential construction fell steeply after the 2009 recession, but both sectors are now seeing limited recovery, Bernard M. Markstein, U.S. chief economist at Reed Construction Data Inc., Norcross, Ga., said.
"Looking forward, there is improvement, but nowhere near where we were before the recession," he said during a Sept. 11 presentation at the Metals Service Center Institutes Economic Summit Forecast 2013.
In terms of residential construction, the United States is "way below our long-term needs" based on current demographic trends, Markstein said. Still, growth has been slow, he added.
Despite housing prices and interest rates plunging to historic lows, buyers are wary of making big-ticket purchases because of uncertainty about their jobs, Markstein said. In addition, smaller building companieslike consumers and unlike giants such as Toll Brothers Inc., Horsham, Pa.,also have difficulty accessing credit, he said.
Still, housing prices have generally stopped falling, which should boost buyer confidence and lessen lenders trepidation, Markstein said. Assuming new housing builds pick up, that for associated structures like strip malls, offices and hospitals should follow, he said.
Markstein largely brushed off concerns about falling home ownership, contending that the trend would likely prove to be fleeting as younger people, perhaps wary of buying houses in the wake of the housing bubble, will eventually aspire to home ownership as the economy improves.
By the same token, he also questioned whether multifamily housing, comparatively strong vs. other residential housing markets, would remain so. He predicted that the sector could be strong for another one to two years before running into danger of overbuilding.
But Markstein seemed to be less bullish on the nonresidential construction sector, infrastructure in particular, where funding is running out for current projects and little work is in the pipeline to replace them.
Now is a good time to spend on infrastructure because building services and material costs are at historic lows, construction unemployment is high and the United States will need better infrastructure if it hopes to reshore manufacturing and other business, he said.
One reason companies look to move back to the United States from abroad is that poor roads and unpredictable power supplies overseas interfere with business, Markstein said. In the United States, unexpected power outages tend to be isolated incidents now, but they might not be so rare in the future if the country does not invest in its infrastructure, he warned.
"Infrastructure matters. Thats where we should be spending," Markstein said. While such spending would lift government debt, it also would pay dividends, he said, comparing such investments to repairing a leaky roof, which adds to or preserves a homes value.