During this last year, there has been an incredible boom in the construction industry. Because of Covid-19, a lot of the construction projects had been halted due to regulations regarding the virus. I AM Builders, a company that offers construction estimating services, has experienced the negative effect that the pandemic has had on the construction industry.
The majority of construction projects were not considered essential services, which resulted in the construction industry taking a big hit because nothing was being built. However, when the regulations softened and allowed construction to continue, the industry boomed and is still booming to this day because a large influx of projects resumed and started because of the long wait of no construction being allowed to take place.
With that being said, there are factors and information to look at to see if this recent construction boom is here to stay or is just a wave that will eventually pass. Let’s take a closer look into this:
Loans from bank
The first factor to look at is a main reason why the whole boom in the construction industry started. At the start of covid-19, almost all construction projects were halted due to the strict regulations on essential services.
When the construction industry opened again for projects to resume and to begin, a ton of people actually decided to start new construction projects. This resulted in a bunch of people taking loans from the bank in order to start their construction projects.
The money that is technically being loaned can be considered “fake” money since it has been loaned from the bank during the pandemic. A reason why this boom might just be a wave is because when it is time for everyone to pay back the loans that they took for their construction project, not everyone is going to be able to pay it back.
The reason that they took the loan in the first place is because they were taking advantage of the banks openness to give people more loans due to the pandemic regardless of if they would be able to pay the loans. What this means for the construction industry is that it can potentially crash due to people not being able to pay back their loans.
Inflated material prices
Another factor to look at closely when analyzing this recent boom in the construction industry is the inflated prices of the material used in the construction projects. In order to manage these inflated prices and save money for your construction projects is to use construction takeoff services to accurately price your material in a financially efficient way.
Since the world went into lockdown, the price of material has skyrocketed tremendously. However, this has not stopped people in continuing to do their construction projects.
One example of how construction material has become inflated is the price of lumber. According to statistics from the National Association of Home Builders, the price of lumber has increased by a large amount of 130% which results in the increase of $24,000 of a newly constructed single-family home.
Shortage of labor
The shortage of labor has been a major factor during this boom in the construction industry in the midst of the pandemic.
For labor, there are 3 cycles of jobs hitting at the same time when labor is in short supply:
- The jobs that got paused
- The jobs that would have started during covid
- The jobs that were planned to start now
When job sites opened up for the construction industry again, there was much needed labor in order for people to continue doing their construction projects, and most contractors were pursing as many construction leads as possible. This caused a labor shortage because all the jobs that got paused, ones that started during covid, and the jobs that were ready to start then at the current time all needed the labor at the same time.
In conclusion, covid has not only had a positive effect on this recent boom in the construction industry, but it has also caused some issues that raise concern in regard to whether the boom is a permanent trend in the industry or is just a wave that will eventually pass over.