Thermoseal’s Market Insights

Thermoseal's Market Insights: Residential and Commercial Construction Trends Through February 2025

Residential Construction Trends

As of early 2025, U.S. residential construction shows signs of recovery. Following a slow start in January, February saw an 11.2% increase in housing starts, reaching a seasonally adjusted annual rate of 1.50 million units—the fastest pace in a year.

This surge was driven by strong demand for single-family homes, which reached their highest start since February 2024 due to limited existing home inventory. However, builders face challenges from high financing costs and material prices.

Despite these pressures, the momentum from 2024, where single-family construction rose by 6.5%, continues into 2025, indicating a growing market for energy-efficient insulation.

Commercial Construction Trends

Commercial construction in 2025 remains robust, though growth varies by sector. Total construction spending hit a record $2.20 trillion in February 2025, with industrial projects and specialized builds like data centers driving much of this growth.

Manufacturing-related construction spending surged by over 20% in 2024 due to reshoring and new projects. However, traditional commercial sectors like retail and office buildings have seen declines due to economic shifts and higher financing costs.

Public and institutional construction, supported by federal funding, continues to grow, presenting significant opportunities for insulation work in new public buildings and facilities.

Overview

Both residential and commercial construction sectors are showing positive trends in early 2025, though the pace and intensity of growth vary. The continued demand in sectors like manufacturing and public infrastructure, coupled with a recovery in single-family home construction, suggests ongoing opportunities for spray foam insulation installers.

Contractors should stay alert to regional construction booms and shifts in market conditions to align their services with areas of highest demand.

Regional Growth Patterns

Regional dynamics show the Sun Belt and Mountain West as the nation's building hotbeds. Fast-growing states like Texas, Florida, Arizona, Tennessee, and the Carolinas are leading in new housing development, thanks to strong job growth, in-migration, and builder-friendly conditions.

In fact, much of the increase in homes for sale over the past year has come from Sun Belt and Mountain West markets, which have seen robust new home construction in recent years. These areas are experiencing above-average demand for both residential and commercial projects, benefiting spray foam installers with more opportunities. By contrast, the Northeast and Midwest are seeing more modest building growth. Construction activity there is steady but not as brisk, often focused on redevelopment or specialty projects. However, even in slower-growth regions, aging building stock keeps a baseline demand for retrofits and upgrades, including insulation improvements.

Overall, the southern and western regions are currently the strongest for new construction and insulation demand, whereas other regions present stable retrofit markets.

Remodeling and Retrofit Activity

Although new construction is the primary driver for insulation work, remodeling and retrofits form an important secondary market. High mortgage rates have led many homeowners to stay put and improve their existing homes rather than move, sustaining renovation activity.

The insulation and weatherization product market was somewhat sluggish in early 2024, but is expected to rebound in 2025 as owners tackle energy-efficient upgrades. Much of this retrofit demand centers on adding attic insulation, wall injections, or spray foam air sealing to cut energy bills in older homes.

Government incentives are further bolstering this segment: a federal tax credit now covers 30% of insulation material costs (up to $1,200/year) for home upgrades through 2032. These rebates, along with rising utility costs and comfort concerns, are prompting more homeowners and businesses to invest in insulating existing buildings.

For spray foam installers, retrofit projects – from weatherizing drafty houses to upgrading commercial roofs – continue to provide steady work alongside new construction jobs.