Fall 2026 Construction Forecast

Each quarter, US Assure CEO Alan Ferguson joins us in the studio to discuss key factors contributing to changes in the construction industry, a forecast for the coming months, and how it will impact your business opportunities.

Read the Video Transcript:

Welcome to the Builders Risk Outlook.

The U.S. construction market in 2026 is facing real pressures, shaped by a combination of high borrowing costs, labor shortages and rising expenses. 

But, construction activity hasn’t stopped despite those headwinds. Instead, it has shifted toward certain regions and project types and values.

Let’s look at:

• what’s shaping the market
• where demand appears the strongest
• which projects are moving forward
• where agents may find builders risk opportunities

Market Forces

No surprise — financing is one of the biggest forces shaping construction activity in 2026. 

Mortgage rates near 7% have reduced affordability, particularly for first-time homebuyers¹. And, many existing homeowners are holding onto low-rate mortgages secured from 2020 through 2022². This "lock-in" effect is limiting existing housing inventory. 

On top of that, contractors continue to face a shortage of skilled labor³, particularly electricians, plumbers, HVAC technicians and framers⁴.

And while material costs have stabilized, rising labor expenses, permitting delays, regulatory hurdles and weather-related risks are increasing the cost and complexity of construction projects³.

Together, these pressures are creating a more selective environment for the construction projects that get built.

Where Demand Remains Strongest

Even in this environment, demand remains favorable in several areas of the country. 

Residential construction is still the market’s largest segment, supported by years of underbuilding⁵, continued household formation and population growth in Sun Belt states⁶.

Builders remain particularly active in Florida, Texas, the Carolinas, Tennessee, Arizona and other high-growth regions⁷. However, higher costs for land, insurance and labor as well as compliance are limiting how quickly production can expand.

Beyond housing, population growth in suburban communities is also creating demand for the small commercial sector. And, healthcare providers⁸, logistics operators and service-oriented businesses⁹ are investing in smaller facilities closer to residential population centers because they often benefit from local development incentives and are financed more easily than speculative developments.

Which Projects Are Moving Forward

Not every construction segment is moving forward at the same pace.

Housing starts have generally ranged between 1.3 million and 1.5 million units annually during the past year¹⁰. That’s active, but still below the level needed to close the nation's housing shortage¹¹. 

Earlier Census data suggested housing starts were approaching 1.49 million units annually. However, much of that activity was driven by multifamily development rather than strong growth in single-family construction¹².

With multifamily building outperforming single-family construction, forecasts suggest it will continue to represent a significant share of new residential development through the remainder of 2026¹³. So, strong rental demand is keeping apartments and workforce housing projects moving in growing metropolitan areas¹⁴. 

Commercial construction with total insured values below $25 million is also showing resilience. These projects include neighborhood retail centers, medical offices, restaurants, automotive service centers and low-risk office renovations¹⁵. While individual project values may be smaller, these projects can present meaningful opportunities in growing markets.

Builders Risk Opportunities

For agents, the takeaway is straightforward: construction opportunities haven’t disappeared. You just have to know where to focus. 

Projects below $25 million in growing markets may be one area to consider. In those areas, the residential and small commercial sectors may continue to present construction opportunities through the remainder of 2026 and into 2027.

See ya next time.

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References:

1. Freddie Mac, Primary Mortgage Market Survey (PMMS), October 1, 2026.
2. Freddie Mac, Mortgage Rate Lock-In and the Housing Market, July 24, 2023.
3. Associated General Contractors (AGC) & NCCER, 2025 Workforce Survey Analysis, August 28, 2025.
4. Associated Builders and Contractors, "ABC: Construction Industry Must Attract 349,000 Workers in 2026 Despite Macroeconomic Headwinds," news release, January 15, 2026.
5. Realtor.com, Housing Supply Gap Exceeds 4 Million Homes in 2025, March 3, 2026.
6. Homesight.org, Is the Sun Belt Still Leading Housing Demand?, Jun 10, 2026.
7. Shovels AI Blog, "Who's Building America? The Top 25 National Homebuilders," February 2026.
8. Jacksonville Business Journal, "Like Retailers Before Them, Northeast Florida Health Providers Chase Rooftops," July 6, 2026.
9. Malabar Hill Capital, "Suburban Markets: The New Commercial Hotspots of 2025," 2025.
10. U.S. Census Bureau and U.S. Department of Housing and Urban Development, "Monthly New Residential Construction, August 2026," Release No. CB26-147, September 17, 2026.
11. REI Prime; see also Goldman Sachs Research, "The Outlook for US Housing Supply and Affordability," October 21, 2025.
12. National Association of Home Builders, "Single-Family Starts Remain Soft in January on Affordability Concerns," March 12, 2026.
13. Arbor Realty Trust Market Insights, "Emerging Multifamily Trends for 2026," January 2026.
14. U.S. Census Bureau and HUD, "New Residential Construction—August 2026," September 2026.
15. QBE Insurance Gorup Press Release, "U.S. Commercial Construction Market Remains Resilient Amid Slower Growth," September 2026.