The U.S. Census Bureau announced today that total nominal construction spending during July was at a seasonally adjusted annual rate of $805.2 billion, down 1.0% from the revised June estimate of $813.1 billion, and 10.7% below the year earlier reading of $901.2 billion. During the first seven months of this year on a not seasonally adjusted basis, total construction spending amounted to $460.3 billion, 11.8% below the $522.0 billion for the same period in 2009.
Spending on private construction was at a seasonally adjusted annual rate of $506.4 billion, 0.8% below June’s $510.7 billion. Year-to-date, it was down 14.6% to $295.5 billion from $346.0 billion for the same period a year ago. Private residential construction was at a seasonally adjusted annual rate of $240.3 billion, 2.6% below June’s $246.7 billion, while year-to-date it was up 2.8% to $23.0 billion from $22.6 billion for the same period a year earlier.
Single-family construction, showing the effects of the slowdown following the expiration of the home buyer tax credit and consumer uncertainty about the economy, fell 2.5% from June to $115.3 billion, its third consecutive monthly decline. However, on a year-to-date basis, it is up 14.8% from a year earlier, to $65.5 billion. With single-family starts down in recent months and builders slowing completions of homes under construction, single-family construction spending is likely to continue to slide in the next few months. As advances in the economy emerge over the next few months and help improve consumer confidence and demand for housing, residential construction activity will pick up, and so too will construction spending. Access to credit for both buyers (availability of mortgages) and builders (AD&C credit) will be key to determining how fast single-family construction rebounds.
Multifamily construction, which has been pummeled in the last year, fell 1.5% in July to $13.0 billion, its lowest level since April 1994. Year-to-date, spending has plummeted 57.2% from $19.2 billion a year ago to $8.2 billion. Weak demand for condos and high rental vacancy rates, which has translated into miniscule rent increases, has combined with a harsh financing environment to slow multifamily construction to its current snail’s pace. There is evidence that the prospect for multifamily projects is slowly improving. The three-month moving average for multifamily housing starts has been generally rising throughout the course of this year, which should begin to turn multifamily construction spending upward.
Improvements, which exclude maintenance expenditures and improvement expenditures on rental, vacant, and seasonal properties, have now fallen for three consecutive months. This development is a bit troubling since remodeling—both improvements and maintenance—has been a source of support for many a builder in this down housing market. In July, spending on improvements fell 2.9% to $112.0 billion from June’s $115.3 billion. Nonetheless, it is still up a healthy 10.6% to $67.1 billion on a year-to-date basis from the same period a year earlier.