Pennsylvania Construction Industry Faces Urgent Slowdown

UPDATE: Pennsylvania’s construction industry is experiencing a significant and urgent slowdown, raising concerns for builders and homeowners alike. Greg Harris, owner of G.P. Harris Construction, Inc. in Jonestown, Lebanon County, reports a steep decline in major home remodeling inquiries, reflecting a troubling nationwide trend in construction spending.

For over a year, Harris has witnessed a drop in business as consumers hesitate to invest in large projects amid rising prices and economic uncertainty. “Through 2023 we were extremely busy, and then it just seemed to be [people] lost the confidence to spend large amounts of money,” Harris stated. He noted that most current projects are focused on necessary repairs rather than cosmetic upgrades.

The slowdown is exacerbated by a combination of higher interest rates, inflation, and supply chain issues. According to the Association of Pennsylvania Realtors, the median home price held steady at $299,900 in September 2024, reflecting a 3.4% increase compared to the previous year. Furthermore, the Associated General Contractors of America reports that less than half of U.S. metro areas added construction jobs for the first time since 2021.

Ken Simonson, the association’s chief economist, emphasized, “Construction employment has stalled or retreated in more and more areas as owners pull back on projects in the face of higher costs.” This sentiment is echoed by builders across central Pennsylvania, where projects are delayed or canceled due to rising costs and financing challenges.

Despite these setbacks, residential construction saw a slight uptick, rising more than 5% in July to an annualized rate of 1.4 million homes, according to U.S. government data. However, many contractors, like Brian Miller from EXCEL Remodeling in Lemoyne, report a dwindling backlog of complex projects like kitchen remodels. “It’s been challenging, to say the least. We are doing OK. We’re not hurting but we are definitely behind from what we were last year,” Miller stated.

Harris, who is set to become the president of the Pennsylvania Builders Association, highlighted the ongoing difficulties in securing building permits, which vary significantly across municipalities. “The process isn’t streamlined, and each municipality works under different timelines and requirements,” he explained.

Builders attribute the slowdown to a multitude of factors. Miller noted, “Customers have told me they don’t want to spend money on home improvement projects, mostly because of economic uncertainty.” This trend has persisted longer than typical, particularly during election years when spending often dips.

Rising construction costs are another significant hurdle. Since 2020, prices for materials and labor have surged by 18%. Recent tariffs imposed on timber and kitchen materials have further inflated expenses, leading to project delays.

Homeowners, wary of high interest rates, are also shying away from home equity loans. Currently, the benchmark 5-year $30,000 home equity loan sits at approximately 8.13%, making it less attractive for potential remodelers. Although the U.S. Federal Reserve recently cut interest rates by 0.25%, financial relief for homeowners remains uncertain.

The outlook for the construction industry remains mixed. While Klinepeter, president of Pyramid Construction, anticipates 2026 will mirror the beginning of 2025, he warns that delays may continue, influenced by factors such as the partial federal government shutdown. “There’s a lot of work opportunities; it’s just getting them started and all of the variables,” he noted.

Harris remains cautiously optimistic, believing that construction trends are cyclical. “They say 2026 is going to be a good year in the remodeling world. Hopefully, the interest rates come down,” he added.

The urgency of the construction slowdown highlights the broader economic challenges facing homeowners and builders in Pennsylvania. As the industry navigates this unprecedented landscape, all eyes will be on how these developments unfold in the coming months.