Environmental AnalysisIntroductionIn the following pages, a discussion will take place about the construction industry, including a clear description of the industry problem and business environment. This article will be divided into several parts starting with the introduction. The next key macroeconomic variables that affect the construction sector will be identified. The macroeconomic variables and the corresponding sectoral variables will be represented graphically for the last five years. Information will be integrated from the text and external sources to illustrate the effects of economic variables on the construction industry. The paper will conclude with a review of the challenges and opportunities that exist for construction companies in the operating environment. Industry Overview This paper will focus on the construction industry, NAICS code 236115 - Construction of new single family homes (except operational manufacturers). This U.S. industry includes general contracting establishments primarily responsible for the complete construction of new single-family housing, such as detached single-family homes and townhouses or townhouses where each dwelling unit (1) is separated from its neighbors by a ground floor. -roof wall and (2) has no dwelling unit constructed above or below. This industry includes general contractors responsible for on-site assembly of modular and manufactured homes. Single-family home design-build firms and single-family construction management firms acting as general contractors are included in this industry. (NAICS, 2008) Description of the Business Environment Problem Housing starts are one of the most closely monitored measures of construction activity. From 2002 to 2005, the home construction sector was boosted by some of the lowest mortgage rates in recent memory, leading to a sharp increase in housing starts, which reached 2.1 million units in 2005. Low mortgage rates also caused house prices to inflate, doubling. figures up over 12 months since mid-2004. However, since 2006, the property market has cooled significantly, with home sales falling sharply and house price inflation slowing. In addition to a sharp drop in housing starts, the construction sector is also having to deal with a backlog of unsold housing. The increase in the number of foreclosures will also have an impact on real estate prices, which so far have simply stabilized or fallen slightly. Finally, with liquidity drying up in the subprime market – due to stricter lending standards and increasing risk aversion on the part of traditional lenders – demand for housing will decline significantly in 2007. Foreclosures will also add to the stock of unsold homes that builders are trying to attract. work through.