While new residential building is expected to decline 16.3% from $478.7 billion in 2006 to $400.8 billion this year, overall construction spending—including residential improvements, nonresidential building and heavy construction—will increase enough to offset the loss in housing starts, according to Reed Construction Data's updated U.S. Construction Forecast Tables released this month.
Industry expenditures should increase 0.8% to just more than $1.2 trillion, said Jim Haughey, director of economics at Reed Construction Data. Spending in 2008 is projected to see an upturn of about 7.1% to nearly $1.3 trillion, led by the residential market as new housing builds are expected to bounce back.
Consumer confidence in the housing market is low and will take some time to overcome. Among other economic factors, Haughey said that credit will be available and affordable, inflation will remain steady and construction funds will be "abundant" as corporations have ample liquidity, and governmental reserves are near an all-time high.