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Revision Suggests More Stress on Difficult 2025 for Cement & Concrete Introduction The outlook for 2025 single-family construction is expected to weaken compared to The Sullivan Report’s  Spring Forecast projections. This somewhat darker view reflects a slightly more adverse interest-rate outlook, a weaker job market, and heightened economic uncertainty. Combined, these factors push the single-family starts outlook from a marginal decline expected in the Spring Forecast for 2025, to one more significant. With that conclusion, the expected decline in 2025 U.S. cement and concrete consumption worsens.   Adverse affordability conditions constrain single-family starts activity. Without meaningful gains in affordability conditions, the single-family construction sector is unlikely to improve . [1]    Given these conditions, the Spring Forecast for 2025 expected : Mortgage rates would drift in the 6.5% to 7.0% range during the first half of the year, followed by a 75-basis-point reduction during the second half of the year. New home price increases would moderate from a 4.2% appreciation rate in 2024 to 1.1% for 2025. Labor markets would slowly weaken but not enough to act as a significant adverse factor. Home insurance rates would increase at roughly 5%. These first half of 2025 assessments were accurate. These assessments were supported by further analyses regarding the impact of tariffs and harsher immigration policies on single-family construction costs. Combined, each of these factors were expected to prompt a modest single-family construction decline this year. Things, however, are expected to change. As a result, a more pronounced retreat in starts activity is now expected. The targeted 75-basis-point reduction in mortgage rates that was expected to materialize during the second half of the year, for example, is now off the table. While some easing in rates is expected to materialize, most of the declines will materialize after the peak of the selling season has passed. For now, the year-end mortgage rate is put at roughly a 6.5% rate, compared to roughly a 5.8% rate envisioned in the Spring Forecast. Homebuyers’ concerns about inflation, job security, and the risks of recession were underestimated in the Spring Forecast. In the context of this uncertainty, buyers are now expected to be more cautious than previously anticipated. The extra caution translates into a hesitancy to buy and lower sales activity. As a result, homes offered for sale are sitting on the market longer. The Months’ supply of new homes on the market indicator reached 9.8 months. (Five-months’ supply is generally considered average.) Aside from a brief period when the Fed started raising interest rates in 2022, the last time it reached such a high level was at the onset of the Great Recession . In this context, it’s easy to understand why homebuilders’ confidence is at its lowest level since 2012. Homebuilders react to high inventories in three ways. First, they sweeten the deal to potential homebuyers by upgrading home finishes at no extra charge, engaging in mortgage rate buydowns, and providing closing cost assistance. Second, they cut prices. According to a recent NAHB survey [2] , 60% of home builders engage in one of these incentives. This, however, is made more difficult in the context of rising costs that have been heightened by tightened immigration and tariffs. In fact, the NAHB survey further noted that more than 30% of homebuilders have cut prices. Third, they slowed the pace of new home starts and production. It's at that point cement and concrete consumptions are adversely impacted. "In fact, the NAHB survey further noted that more than 30% of homebuilders have cut prices...[and] slowed the pace of new home starts and production...it's at that point cement and concrete consumptions are adversely impacted." Arguably, higher inventories suggest a moderation in new home prices. The Spring Forecast, however, reflected only a 1.1% increase in prices for 2025. The higher inventories will soften even that modest increase. This adjustment’s impact on overall affordability is much less significant than the movement in mortgage rates. Taking it all into consideration, the improvement in affordability that was expected to materialize in the second half of the year in the Spring Forecast is now more muted. Economic performance during the second half of the year will also play a critical factor in single-family starts activity. We await data on the Administration policies’ impact on inflation and employment conditions. That data will play a key role in determining the next moves by the Federal Reserve. Thus far, no significant, visible adverse effects on the economy have materialized from tariffs. To be fair, enough time has not passed for the impacts to materialize in the data. Those impacts will not get reflected into the data until government reports published in August and September [3] . I am not optimistic that tariffs will continue to show a benign impact on the economy. Price increases will materialize, but their impact could be muted by weakening economic conditions, particularly in the service areas of the economy. Either by higher inflation or weaker economic and job conditions, consumers at the lower-income quartiles will struggle. Economic growth will be threatened. These impacts will likely be adverse and seep into the economy over a longer period of time than many expect. Tax benefits from the One Big Beautiful Bill Act (OBBBA) will materialize this year. That is expected to support a 10 to 15 basis point improvement in real GDP this year. Near term, it will help diminish - but not eliminate the adverse consequences of tariffs and harsh immigration policies on the economy. However, it will also add to the federal deficit. Federal debt will increase. Some upward pressure on long term rates is expected – including mortgages. If the economy unfolds as expected, the cost of goods to consumers will increase, and the economy will soften – akin to stagflation. This will make the Fed’s decision to cut rates more complex. The result could be to delay or moderate the rate cuts. Under this economic scenario, the lending environment will become more perilous. Banks will grow more risk adverse. Credit will tighten. Even as rates begin to decline, difficulty in getting credit access could delay or moderate a recovery in single family starts. Combined, all this could prompt a larger decline in single family construction in 2025 than previously expected and delay its recovery. With economic weakness, mortgage rates will ease modestly in late 2025 and early 2026. A click or two reductions in mortgage rates, however, is not going to improve affordability much. A robust recovery in single-family construction will not materialize in weakened labor markets or high prevailing interest rates. If the outlook outlined materializes, it will take time for both of those factors to work themselves out. There is a threshold mortgage rate for a meaningful improvement in homebuyer affordability. I estimate the threshold rate at 5.5% for a 30-year conventional mortgage. Once that threshold rate is achieved, it will ignite a significant recovery in the housing sector. Until that time, modest improvements in affordability will likely take place in the context of a weakening labor market – suggesting only a tepid 2026 single family construction recovery. [1]   Since 2020, the average monthly payment for a new home has doubled. On top of that, in some regions, insurance premiums have climbed dramatically. These high costs have deterred ownership. More than 65% of U.S. households own a home. For young adults that rate is at 39% - down from 45% 20 years ago. First-time homeowners are currently at the lowest level ever. [2]   NAHB/Wells Fargo Housing Market Index, July 2025, https://www.nahb.org/news-and-economics/housing-economics/indices/housing-market-index . [3]   Each time the Administration pushes back the date new tariff rates will become effective, it also pushes back the data showing tariff impacts. Pushing back the effective tariff date from July 9th to August 1st could push back the data, evidencing their impact on inflation by a month. The Sullivan Report Resources The Sullivan Report  offers subscription-based, economic forecasts and market updates that are tailored to the cement, concrete, construction, and aggregates industries. Released three times a year, the flagship Cement Outlook  features 5-year forecast projections, expert analyses, and practical insights to help support informed decision-making and long-term strategic planning in dynamically shifting industry landscapes. With insights from renowned economist Ed Sullivan , The Sullivan Report also provides expert-led, keynote presentations as well as organizational or regionally streamlined forecast consulting services. For more information, contact us at TheSullivanReport.com  or by email at info@thesullivanreport.com .

"The Wall" is Back On with the "Big Beautiful Bill" Adding to Cement/Concrete Consumption. While the U.S.-Mexico wall features a metal slat-style structure, there is a heavy volume of concrete both mixing with rebar inside the steel bollards (posts) as well as the support foundation. Introduction The One Big Beautiful Bill Act (OBBBA) was recently enacted into law. The bill contains both positive and negative impacts for near-term and longer-term economic activity. It will also impact construction activity. The key impacts of OBBBA on the economy and construction activity will be addressed in future articles. This article focuses on one aspect of OBBBA – the building of the wall and its impact on cement and concrete consumption during the forecast horizon (2025-2030).   What is Proposed by the OBBBA? OBBBA allocated $46.5 billion to the Department of Homeland Security (DHS) for “physical barriers” along the Mexican border.  (Physical barriers include walls, fencing, pedestrian and vehicle barriers, security access roads, and surveillance equipment.) High trafficked and high threat areas will likely be the focus of spending. Spending for the new wall initiative is triple the amount spent during the first Trump Administration of roughly $15 billion. Funds are available through September 30, 2030, giving the DHS a five-year window to plan and execute projects. During the first round of wall building in 2017-2020, it took roughly one year from the executive order for building to begin. If similar timing materializes, construction probably won’t begin until the second half of 2026 or early 2027. The Border Characteristics The border with Mexico spans four states totaling 1,933 miles. The four states include California (140 miles), Arizona (373 miles), New Mexico (180 miles) and Texas (1,241 miles). Natural barriers, such as mountains and rivers, reduce the need for man-made barriers. These areas, as well as very remote areas, will likely rely on drone surveillance. Man-made physical barriers of entry into the U.S. from Mexico already exist along some portions of the border. By state, these barriers include California (130 miles), Arizona (253 miles), New Mexico (136 miles) and Texas (320 miles). Some of these barriers include fences and vehicle barriers. Some of these barriers may not constitute a “secure border area” by the Administration and as such may have to be rebuilt/upgraded.   OBBBA does not specify where the wall will be built.  Unsecured, high trafficked border areas are likely the targets. According to my calculations, California has 10 miles of unsecured border, New Mexico has 44 miles of unsecured border, and Arizona has 120 miles of unsecured border.  By far, Texas is the biggest beneficiary due to its large expanse of unsecured border estimated at 921 miles. Of this, 900 miles is attributed to the Rio Grande River, which some consider as a natural border. Given the milage dedicated to river barriers (900 miles) it is clear that the Act views the Rio Grande River as currently unsecured.   Barrier Characteristics OBBBA funds the construction of 701 miles of primary wall, 900 miles of river barriers, and 629 miles of secondary barriers, along with the replacement of 141 miles of existing vehicle and pedestrian barriers. Not all this constitutes new wall construction. Some construction targets the rebuilding of existing barriers. Each of these activities, to a greater or lesser degree, require cement and concrete for their construction. The amount of cement and concrete used in constructing the wall depend on the length of the wall, the type of wall, its design, dimensions, and construction method. River Barriers:  River barriers represent the largest stretch of milage to be constructed. Construction of this barrier will exclusively target high-traffic illegal crossing zones along the Rio Grande River in Texas. No design or material specification is stated in the Act. The river barriers are likely to include floodwalls/retaining walls, submerged cutoff walls and riprap-reinforced barriers. Each can vary in size. Each uses different amounts of cement and concrete. Primary Barriers:  Seven hundred and one miles of primary land barriers represent the second largest stretch of milage to be constructed. These barriers are what typically comes to mind when talk concerns “building a wall”.  Based on the amount of unsecured border, each of the four states are expected to see the construction of these barriers.  California is expected to build as much as 10 miles of “wall”, New Mexico 44 miles, Arizona 120 miles, and Texas 526 miles. No design or material specification is stated in the Act. During the first Trump Administration, the most commonly built wall was a bollard-style barrier  made up of vertical steel posts (bollards) that are set closely together (typically 4–6 inches apart), a nchored into a reinforced concrete foundation, and tall enough  (often 18–30 feet) to deter climbing.  In addition to anchoring the posts, the bollards were often filled with concrete. Secondary Barriers: Secondary barriers  are designed as additional layers of fencing behind or alongside the primary steel bollard wall to enhance security and delay crossings. While specs during the first Trump Administration varied by region and site, typical barriers include bollard-style fences,   reinforced concrete walls, and chain linked fences topped with razor wire. Vehicle & Pedestrian Barriers: Vehicle barriers  are intended to prevent unauthorized vehicular access across the border. These are typically lower-profile Jersey” vehicle barriers that block cars and trucks. Pedestrian barriers  and tall, fortified walls designed to deter and prevent individuals from crossing on foot. These often include steel bollards, reinforced fencing, or solid wall segments. Summary To get to the estimate for cement consumption required to build the wall, some mathematical gymnastics is required. Combining the mileage of unsecured border in each state, cross reference these estimates with the total mileage of barrier identified in the Act by type of barrier, and then applying the average cement consumption per mile of barrier yields cement consumption by barrier, by state.  For the most part, the amount of cement consumption per mile of barrier approximates the usage by barrier estimated during Trump’s first term. Still with me? No? Good that was the intent. At the end of the day, a good bit of assuming has to be undertaken to yield estimates. I believe the assumptions I have used are across-the-board conservative. Even relatively small changes in the assumptions can lead to significant changes in the estimate. As a result, when establishing high-low estimates a large-risk variance should be used. A 15% variance yields a range of 750,000 to 1,000,000 metric tons. The table below summarizes the findings. It should be noted that more than 80% of estimated cement consumption is expected to be consumed by Texas. Overall, very little construction is expected to materialize during the next 12 months. Thereafter, construction in the second half of 2026 accelerates reaching peak consumption in 2027 and gradually retreating in subsequent years. Keep in mind, some of the land, particularly along the Rio Grande is privately owned. Building the wall could involve lengthy legal battles and eminent domain issues that could slowdown and reduce realized construction. These estimates do not include ancillary infrastructure investments such as towers, gates, culverts, and access roads. About The Sullivan Report The Sullivan Report  delivers subscription-based economic forecasts and market updates tailored to the cement, concrete, construction, and aggregates industries. Its flagship publication, the Cement Outlook , is released three times a year and features 5-year forecast projections, expert analysis, and actionable insights to support informed decision-making and long-term strategic planning amid an evolving economic landscape. Guided by renowned economist Ed Sullivan, The Sullivan Report also offers keynote presentations and customized forecasting services for organizations and regions seeking deeper, data-driven market intelligence. For more information, message us here, visit TheSullivanReport.com ,  or email us at   info@thesullivanreport.com .