Is the Construction Slowdown Becoming a Bigger Risk for Polyurethane Producers?

October 21, 2026 7 min read

The slowdown in U.S. construction is becoming an increasingly important concern for polyurethane producers, particularly those supplying rigid foam insulation, building materials, and household appliances. Although recent construction spending figures indicate continued weakness, the challenges facing construction-related polyurethane consumption have been developing for several years.

U.S. housing starts reached approximately 1.60 million units in 2021 before declining to 1.55 million in 2022 and 1.42 million in 2023. Construction activity weakened further in 2024 and 2025, with annual starts falling to 1.37 million and 1.36 million units, respectively. The cumulative decline of approximately 15% between 2021 and 2025 reflects the effects of elevated borrowing costs, declining housing affordability, and increased construction expenses.

The downturn has not been uniform. Single-family starts recovered temporarily in 2024, while multifamily construction contracted. However, single-family building activity weakened again in 2025, reinforcing concerns about demand for materials used in new residential developments.

For polyurethane producers, the significance of this prolonged adjustment extends beyond housing statistics. Reduced residential construction can affect orders for insulation materials, refrigeration equipment, adhesives, sealants, and other polyurethane-based products.

2026 YTD: Residential Construction Remains Under Pressure

The latest U.S. Census Bureau data indicate that construction activity has remained subdued during the first nine months of 2026.

From January to September, total housing starts reached approximately 1.037 million units, down 1.1% from the corresponding period in 2025. Single-family starts declined 4.0% to 699,000 units, while starts in buildings containing five or more units increased 6.9% to 327,000 units.

This divergence suggests that residential construction demand is increasingly influenced by changes in the mix of housing projects rather than an equally distributed contraction across the sector.

Building permits, which provide an indication of future construction activity, declined 0.5% year over year during January–September. Single-family permits fell 2.8%, signaling continued caution among developers.

More notably, housing completions declined 12.5% year over year to approximately 970,000 units during the first nine months of 2026. Single-family completions fell 10.8%, while completions in buildings containing five or more units decreased 16.3%.

The sharp reduction in completions could have implications for polyurethane-related applications associated with later stages of construction, including certain insulation installations, interior finishing, and household appliance purchases.

Construction investment figures also point to continued pressure. According to the Census Bureau, total U.S. construction spending during January–August 2026 amounted to USD 1.450 trillion, down 3.1% from the corresponding period in 2025.

In August, spending stood at a seasonally adjusted annual rate of USD 2.203 trillion, representing a 1.7% year-over-year decline despite a 0.9% month-over-month increase.

Together, these indicators suggest that the slowdown is not confined to a single month, although its impact continues to vary across construction categories.

September Data Signal Additional Weakness

The September figures reinforce concerns about the near-term residential construction outlook.

U.S. housing starts declined 5.2% from August to a seasonally adjusted annual rate of 1.221 million units, down 7.4% from September 2025. Single-family starts fell 4.6% month over month to 859,000 units, while total building permits edged down 0.2% to an annualized 1.400 million units.

Housing completions reached an annualized 1.192 million units in September, 14.0% below their year-earlier level.

Weakening builder confidence adds to the uncertainty. The NAHB/Wells Fargo Housing Market Index declined to 29 in October, its lowest reading since June 2012. Approximately 43% of surveyed builders reported reducing prices, while 65% continued to offer sales incentives.

These developments suggest that financing costs, affordability constraints, and limited buyer activity remain significant obstacles to a sustained recovery in new-home construction.

How the Slowdown Affects Rigid Polyols and MDI Consumption

The construction industry is an important downstream market for polymeric MDI and rigid polyurethane foam systems, particularly in thermal insulation, spray foam, insulated panels, and roofing products.

A reduction in new construction projects can translate into weaker polyurethane demand through several stages of the building cycle.

Lower permit activity limits the pipeline of potential projects, while fewer housing starts reduce future requirements for insulation materials. As projects progress, reduced building activity may lead to lower orders from insulation manufacturers and distributors.

However, the transmission to upstream producers is not immediate. Insulation is installed at different stages depending on the product and building design, creating a time lag between construction statistics and raw material consumption.

The impact also differs by polyurethane formulation. Polymeric MDI is used in both polyurethane and polyisocyanurate insulation systems, while rigid polyether polyols are particularly relevant to spray foam and polyurethane insulation applications. Many commercial PIR boardstock formulations rely on polyester polyols.

Consequently, changes in construction activity do not affect every rigid polyol category equally.

Inventory management could further influence purchasing patterns. Manufacturers facing uncertain downstream orders may reduce raw material procurement or consume existing inventories, temporarily amplifying the demand pressure experienced by polyol and MDI suppliers.

Appliance Manufacturing Adds Another Demand Risk

The construction slowdown also affects polyurethane through its relationship with household appliance manufacturing.

Rigid polyurethane foam is widely used in refrigerators and freezers because of its insulation properties. These applications consume MDI and rigid polyol systems during manufacturing.

New housing completions contribute to appliance demand when newly built properties are equipped with household equipment. The 12.5% year-to-date reduction in housing completions therefore raises concerns about a potential weakening in this source of appliance consumption.

However, replacement appliances, commercial refrigeration, and exports provide additional sources of demand.

As a result, housing completions should be considered a leading indicator for certain appliance purchases rather than a direct measure of total refrigerator production or polyurethane consumption.

Renovation and Commercial Construction Offer Partial Support

Despite weaker new-home construction, renovation and selected commercial building activities continue to provide opportunities for polyurethane producers.

The NAHB Remodeling Market Index stood at 62 in the third quarter of 2026, reflecting relatively positive sentiment among remodeling contractors. Renovation projects, including insulation upgrades, roofing replacement, and energy-efficiency improvements, can generate demand for polyurethane-based products independently of new housing starts.

Nonresidential construction presents a more mixed outlook.

According to the American Institute of Architects’ July 2026 Consensus Construction Forecast, total nonresidential building spending is expected to decline 0.3% in 2026, following a 2.0% contraction in 2025.

However, commercial construction spending is projected to increase 4.8%, largely supported by data center investment. Data center construction spending alone is forecast to grow 33% in 2026.

By contrast, manufacturing construction spending is expected to fall 11.6%, while warehouse construction is projected to decline 1.7%.

These differences matter for polyurethane suppliers because individual building types have distinct insulation requirements and material specifications.

Furthermore, increases in construction spending do not necessarily translate into equivalent growth in polyurethane consumption. Higher project values can reflect rising costs, while spending on electrical equipment, machinery, and other non-insulation components may account for a substantial share of investment.

Full-Year 2026 Expectations: Limited Recovery in Sight

The latest housing forecasts suggest that U.S. residential construction will remain subdued through the final quarter of 2026.

In its October 2026 Housing Forecast, Fannie Mae projects total housing starts of approximately 1.341 million units for 2026, down 1.1% from 2025.

Single-family starts are expected to decline 4.1% to 902,000 units, while multifamily starts are projected to increase 5.7% to 438,000 units.

The forecast also anticipates total home sales declining 1.7% in 2026, with new single-family home sales falling 5.5%.

For the fourth quarter, Fannie Mae expects housing starts to average an annualized 1.307 million units, indicating that construction activity is unlikely to return to its earlier post-pandemic levels before year-end.

The outlook for 2027 remains cautious. Fannie Mae forecasts a further 2.9% decline in total housing starts to approximately 1.301 million units, with single-family starts falling slightly to 898,000 units.

These projections are subject to changes in mortgage rates, financing availability, construction costs, and household demand. Nevertheless, they point to limited near-term recovery in residential building activity.

Implications for Polyurethane Producers Heading into 2027

The combination of weaker single-family housing starts, reduced completions, and an uncertain construction outlook suggests that demand-side pressure may persist for polyurethane producers with substantial exposure to residential building applications.

Rigid polyol and MDI suppliers serving insulation manufacturers could experience uneven purchasing activity, particularly if new housing projects remain subdued and downstream customers continue adjusting inventories.

The implications will differ across manufacturers. Producers supplying spray foam insulation for residential construction may face different demand conditions from those serving commercial roofing, industrial insulation, refrigeration, and renovation markets.

Market conditions may also be affected by regional polyurethane capacity, import competition, feedstock costs, and producer operating rates.

For flexible polyols and TDI, any impact from the construction slowdown would be more indirect, primarily through furniture, mattresses, and other household products associated with housing transactions and consumer expenditure.

Importantly, a decline in construction spending or housing starts cannot be interpreted as an equivalent percentage reduction in polyurethane consumption. Assessing the actual effect requires information on insulation output, appliance manufacturing, product mix, and raw material purchasing volumes.

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