While the Federal Reserve finally began to cut interest rates in the second half of the year, overall construction growth was modest in 2024, according to Dodge Construction Network.

“Construction starts continue to move more or less sideways and are making little progress despite the first round of rate cuts from the Federal Reserve in September and November,” says Richard Branch, Dodge chief economist. “While the queue of projects piling up in planning is large, developers appear to be concerned about how the economy will fare in the new year and seem unwilling to commit to moving projects forward.”

Branch notes that some of these worries are spurred by uncertainty due to the incoming administration. “First and foremost on their minds is likely the concern over tariffs and immigration enforcement promised by President-elect Trump when he takes office. Should these occur, they are likely to offset any benefit provided to the sector by lower interest rates and could delay projects even longer.”

Through the first 11 months of the year, residential starts were up 8%, according to Dodge. After a strong start, growth in the single-family sector has slowed, which Branch attributes to mortgage rates remaining high. Multi-family starts “remain in the doldrums,” but an uptick in the planning stage suggests this market could see some growth next year. In October and November, the largest multi-family projects to begin were both in New York City—the $637-million Utopia Living apartments in Flushing, Queens and the $384-million Frederick E. Samuel apartment renovations in Manhattan..

Non-residential starts rose 4% through November overall. In that category, institutional starts saw the largest increase at a rate of 17% year-to-date, largely due to growth among health care, transportation and sports/recreation projects.

Data centers and hotel work drove starts in the commercial sector, up 5% year-to-date. The most prominent non-residential projects to start work in the last two months were the $2.2-billion Henry Ford Hospital Tower in Detroit and the $1.4-billion third phase of the LG Electric battery plant expansion in Holland, Mich.

In the non-building sector, starts “remain reasonably robust,” says Branch, noting a 5% increase through November. Environmental public works and pipeline markets have been strong, while utility starts fell 16% year-to-date. Branch notes when removing the utility category from the sector, non-building starts overall would be up 13% in the same time period. In the past two months, the largest non-building projects to break ground were the $2.8-billion Central Everglades Reservoir Embankment project in Palm Beach County, Fla., and the $1.6-billion Haynesville natural gas pipeline across 255 miles in Louisiana.

Spikes in Lumber

S&P Global’s fourth quarter forecast predicts softwood lumber prices will fall 3.5% overall in 2024, cutting into the 6% decline expected in the third quarter forecast.

“Spot prices for softwood lumber have spiked in recent months to levels not seen since 2022,” says Luke Lillehaugen, senior economist at S&P Global. “Price growth has been driven by a variety of factors including continued supply tightness, the beginning of interest rate cuts from the Federal Reserve, and political developments surrounding the U.S. election and speculation around possible tariffs.”

S&P Global forecasts a 9.3% increase for softwood lumber in 2025, while plywood prices are predicted to stay flat after falling 1.8% in 2024.