OUR THOUGHTS ON:

Construction Industry Outlook for 2010

Construction

By Trevor Warren

After three straight years of decline in the U.S. construction market and a 40% drop in building activity, will 2010 provide more opportunities? The National Association of Home Builders is forecasting approximately 610,000 single-family housing starts in 2010, compared to about 443,000 starts in 2009. The first-time homebuyer tax credit of $8,000 was extended to June 30, 2010 and includes a $6,500 tax credit for repeat buyers and will be a contributing factor for the projected increase in housing starts. Another indicator that the construction market may be turning around is an increase in existing home sales. In December, the National Association of Realtors reported a 41% increase in existing home sales in November 2009 over November 2008 and a 7% increase over October 2009.

The $787 billion American Recovery and Reinvestment Act (ARRA) has contributed to a positive outlook for highway and bridge construction, as $27.5 billion of the ARRA funds have been earmarked for this sector. This is in addition to the $41.2 billion in 2010 highway program appropriations. Also, in December 2009, the House of Representatives passed another jobs creation stimulus bill, which will provide $27.5 billion of additional funding to the highway program. The American Road and Transportation Association expects highway, street and bridge construction to reach approximately $90.5 billion in 2010, compared to approximately $83 billion in 2009.

Although 2009 was an extremely grim year for the construction industry, many experts are hopeful that 2010 will be the year that the industry starts to rebound. The Bureau of Labor Statistics reported that the unemployment rate rose to 19.4% in November 2009 for the construction industry. Many are hopeful that the ARRA funds and tax incentives for homebuyers will help ease the unemployment rate in 2010. However, it will still be crucial for companies to continue to monitor their labor and overhead rates and appropriately budget costs.

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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.

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