2022 Construction Insurance Forecast
The construction insurance market continues to grow and doesn’t show signs of stopping. To wrap up 2021, our President Alan Ferguson analyzed real estate trends to determine three key areas projected to influence builder success in 2022.
1. Housing Demand
Most of us have interacted with the booming housing market due to the effects of COVID-19. But the question is, will it hold up in 2022? Housing data indicates yes.
Despite higher prices, people continue to buy. The heightened price of homes remains stable at $379,000. Sales of completed homes increased in September to a 507,000-unit pace – which is a six-month high for 2021. These sustained purchases suggest that builders have uncovered ways to cope with the lack of building materials and labor concerns in today’s market.
However, the construction industry is still impacted by backed-up supply chains. Inventory gains are mostly homes that have not been started or are under construction. In fact, 105,000 homes are up for sale that have not even broken ground. This is the highest number the market has seen since 2006. While the building of new homes is a positive, projects continue to experience delays across the country.
2. Supply Chain Issues and Labor Shortages
The construction industry is still feeling the effects of supply chain and labor shortages, but it has not impacted the desire for new homes. Underlying demand for housing remains strong, and buyers seem unbothered by the absence of completed homes available. This indifference is supported by the 27%increase in the sale of homes that have not even begun construction.
Construction has been moving at a slower pace due to supply chain issues and labor shortages. Luckily, data implies that supply chains are gradually recovering from COVID-19 and extreme weather events. Builders are raising prices at a slightly slower rate than we’ve seen previously. During the month of September, the median price increased 18.7% over the year compared to 23.3% the prior month.
It’s crucial to analyze the relationship between the inflationary methods that impact our economy when predicting future trends. One is the Consumer Price Index (CPI), which determines the value that consumers place on goods and services they purchase. Examples include gasoline, coffee, and other commodities. The complementary method is the Producer Price Impact (PPI), which calculates inflation from the producers of the goods and services.
Considering both inflationary measures have risen throughout 2021, experts anticipate that the PPI will settle and slowly decline in 2022, and the CPI should follow suit.
Overall, the numbers indicate that housing demand is here to stay. Statistics suggest that buyers are tolerable of housing production timelines and delays, and we should see some Producer Price Impact softening as the nation continues to recover from COVID-19 and some of the extreme weather that led to unexpected supply chain issues earlier in 2020.