US Construction Sector NAICS 23

Aug 4, 2025 - Homebuilders Slow to Adopt AI

• Most single-family homebuilders have yet to leverage artificial intelligence, according to a recent survey by the National Association of Home Builders (NAHB). Among 12 categories of AI use, there was significant adoption in just two. One-fifth of builders surveyed said they used AI to generate advertising and marketing materials, and 11% use AI to help analyze markets and plan projects. Other uses, including project design, safety monitoring, managing production and scheduling subcontractors, and permitting had use rates of 3% or less. Builders not using AI were asked to rate which uses they were most likely to adopt in the next two years using a scale of 1 (not at all likely) to 5 (very likely). Generating advertising and marketing materials, and help analyzing markets and plan projects had the highest likelihood ratings – 3.6 and 3.0, respectively. The other 10 AI uses had likelihood ratings of 3.0 or less.
• The domestic policy bill signed by President Trump on July 4, 2025, sunsets a tax credit program that could slow the burgeoning office conversion trend, according to Construction Dive. The new law repeals the Section 179D commercial building energy efficiency tax deduction. For nearly two decades, the deduction provided financial incentives for energy-efficient upgrades—such as HVAC and lighting improvements—that often served as a catalyst for broader renovations and conversions. Industry experts warn that without this federal support, property owners may be less inclined to invest in upgrades, especially in foreclosure or bankruptcy scenarios where risk mitigation is critical. The loss of 179D could stall office-to-residential conversions, reduce job creation in trades and engineering, and leave firms that invested in sustainability infrastructure without a viable path forward. The Biden-era Inflation Reduction Act made the 179D deduction permanent, but the new law requires the deduction to expire for projects beginning after June 30, 2026.

• Home remodeling spending growth is expected to remain flat in 2025 and the first half of 2026, according to the Leading Indicator of Remodeling Activity (LIRA) report by the Joint Center for Housing Studies at Harvard. Homeowner improvements and repairs are expected to increase 2% to $509 billion in the third quarter of 2025 compared to Q3 2024. In the fourth quarter of 2025, remodeling spending will rise quarter-over-quarter to $511 billion, up 1.8% from Q4 2024. Spending will increase to $524 billion in Q1 2026, up 2.2% from Q1 2025. In the second quarter of 2026, year-over-year spending is forecast to rise 1.2% to $518 billion. Joint Center expects a weak housing market to put downward pressure on remodeling spending. However, recent federal cuts to incentives for efficiency improvements may spur short-term growth as homeowners make upgrades before benefits expire at the end of the year.
• North American construction and engineering spending in 2025 is expected to grow by 1% after increasing an estimated 7% in 2024, according to FMI’s third-quarter 2025 North American Engineering and Construction Outlook. With growth of 32%, the data center sub-sector will lead 2025 nonresidential construction, followed by sewage and waste disposal (7% growth over 2024), amusement and recreation (+6%), water supply (+6%), educational (+4%), and public safety (+4%). Commercial construction spending is expected to decline 4% in 2025 amid a 4% drop in warehouse demand, which accounts for more than half of annual commercial spending. Lodging construction spending is forecast to fall by 3%, and stubbornly high office vacancies are expected to hold new office construction to 2% growth in 2025. Amid high mortgage interest rates and a lack of affordability, single-family construction spending is forecast to rise by 1% in 2025. A recent jump in new apartment supply and unfavorable cost conditions will reduce multifamily spending by 9% in 2025. In addition to strong spending on water and sewage projects, other segments of the infrastructure sector are projected to see spending increase in 2025, including power (+3%) and highway and street (+2%).