Is the Construction Boom Dwindling in Houston? Read What Experts Are Saying

Situation in the market
Zaid Rahman
November 1, 2021
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Houston’s construction boom in recent years has been undeniable. Texas has experienced unprecedented population growth over the past decade. The combination of positive factors including …

  • A robust Houston job market
  • A lower cost of living than other major metro areas
  • High salaries and no state income tax
  • Sunny weather year-round; and
  • Great schools, restaurants, entertainment, and culture

… mean that people are flocking to this Texas city in droves — and they need places to live. 

In recent years, construction companies have barely been able to keep up with the market’s demands, and a career as a builder or construction worker has been a solid and lucrative choice.

But then a global pandemic hit, and the trends started to change. Instability in our world has thrown everything up in the air.

So what’s going on in the Houston construction realm these days? Are we seeing an upward trend again, or is the future uncertain? Read on to find out!

Construction by the Numbers: The Ups and Downs of the Last Year-and-a-Half

The United States Census Bureau’s monthly reports of United States construction spending show some interesting things. 

In January 2020, monthly spending hit 1369.2 billion dollars in our country. As news of the impending COVID-19 public health emergency started to travel, those numbers began to drop quickly, hitting a low of 1346.2 billion dollars in April. 

The United States GDP (Gross Domestic Product) from construction also shows a precipitous drop from 665.1 billion dollars in early 2020 to 615.8 billion by mid-year.

Fortunately, with shut-downs causing more people to spend time almost exclusively in their homes, this led to a boost in residential construction and renovations — especially in low-cost markets like Houston.

After hitting a low in April, the monthly construction spending numbers showed a continuous and steady increase, reaching 1552.2 billion dollars by June of 2021. This is huge growth over a relatively short period — a 183 billion dollar increase from January 2020 to June 2021.

To compare, the same time period two years earlier — January 2018 to June 2019 — only showed growth of 24.2 billion dollars.

And the construction GDP soared to 684.4 billion dollars in the first quarter of 2021, far outperforming previous years.

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What Does This Mean for Houston?

Trends show that the recent multi-family construction wave in Greater Houston peaked in 2020. This happened as apartment operators raised concessions to attract renters due to the pandemic, and builders bought over 20,000 units to reach the cycle high.

However, sustained growth is still expected in the coming year, which is great news for the construction industry.

Apartments aren’t the only area where growth is occurring. A report ranks Houston as 8th in the nation regarding the number of new homes for sale.

So while federal data shows that Houston lost the most construction jobs in the country in 2020, Texas had the highest number of construction workers in the country to begin with.

And Houston has been ranked the second-best city for construction workers in the United States.

So while things are still a little uncertain and up in the air, the construction industry in Houston seems pretty solid.

4 Factors Continuing to Affect the Houston Construction Market

As Texas Comptroller Glenn Hegar commented last year:

“Predicting the course of Texas' enormous, complex, and dynamic economy is a difficult task in the best of times, and much more so in the face of a truly unprecedented event such as the pandemic.”

Let’s explore three specific areas that are contributing to how the market is trending right now.

#1: The COVID-19 Delta Variant

As vaccination numbers rose and hospitalization numbers dropped, Americans were hopeful. Then the Delta Variant hit.

It has been frustrating and scary to deal with another downturn in the pandemic, and this wave has affected the construction industry just as it seemed like things were getting back to normal.

The rapidly-growing population of Texas and a pandemic-driven boom in housing sales has created high demand for builders — but it can be hard to keep up with that demand when hit by another wave of the coronavirus. 

Data from the U.S. Bureau of Labor Statistics showed that construction employment was on the upswing before Delta arrived, but major absences due to illness and supply-side issues have made it hard for companies to keep up with the jobs they have. 

#2: Project Cancellations & Financial Handcuffs

This isn’t an external factor. But it’s one that slows many construction companies down. And for some, it can even be a fatal blow.

Construction companies, large and small, are having increasingly difficult times getting financing, loans, and credit. 

  • Go to the bank to get a loan? Denied.
  • Try to increase your credit line to pay for materials? Absolutely not.
  • Pray and hope your GC pays you within the first 30 days? Yeah right.

Thankfully, Flexbase makes life easier for Houston construction companies by solving the problems above. ⬆

Flexbase users usually see the following:

  • 10x higher credit limits
  • 5x faster payment on their projects
  • Easy access to loans (at better rates that traditional financial institutions)

Flexbase, no matter what the future of the Houston construction market looks like, is increasing the odds, predictability, and pace for construction companies to grow and scale.

#3: Changes in Lumber Costs

Although it may not seem like it, there were some positive changes to the Houston construction market, including lumber costs. After soaring during the first wave of the pandemic, lumber prices are finally dropping. 

Last year, the demand for new homes and a surge in renovations and DIY projects led to lumber prices reaching historic highs. In many cases, this priced some construction companies out of jobs and profitability.

But several factors including …

  • Sawmills being able to ramp up production as COVID-19 cases initially dropped
  • More people returning to work and doing fewer at-home projects; and
  • Demand for lumber dropping as construction slows in the coming winter months

… have led to more affordable prices. While they won’t get back to pre-pandemic levels any time soon, lumber prices are more reasonable these days, and that’s a positive for the construction industry.

#4: Difficult Economic and Market Conditions

Even though there were so many setbacks in 2020, a significant backlog of construction projects helped stabilize the markets. But in 2021, there have been issues of project cancellations and postponements, plus fewer bidding opportunities.

As what lies ahead remains uncertain, many investors are hesitant to bring the next generation of projects to market. 

This could lead to another stall in the Houston construction industry, but it’s still hard to forecast which direction things will go. 

A Summary of What to Expect in the Houston Construction Industry in the Future

All these facts and figures have made things clear as mud when speculating about what comes next for Houston construction businesses.

The 2021 Construction Outlook Survey shows responses that are all over the place about impacts and future changes in Texas. 

While we know things have been challenging and the industry has been largely affected, it also seems that the big picture is still looking good.

The global pandemic was a time of change for many people and prompted a lot of movement within the country to areas where they feel they can be happier and live more cheaply. This means that the future is bright for Texas, and specifically Houston, as folks continue to relocate to the area.

In the long run, this points to another uptick in the Houston construction boom.

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