Residential construction spending increased for the second month in a row in October thanks again to spending for multifamily construction and improvements.
The U.S. Census Bureau released October construction spending data today. Total nominal construction spending was at a seasonally adjusted annual rate (SAAR) of $802.3 billion, up 0.7% from the revised August estimate of $797.1 billion (essentially unchanged on a statistical basis), and 9.3% below the year earlier reading of $884.7 billion. During the first ten months of this year on a not seasonally adjusted (NSA) basis, total construction spending amounted to $684.7 billion, 11.2% below the $770.6 billion for the same period in 2009.
Spending on private construction was $481.8 billion SAAR, essentially flat from September’s $477.8 billion. Year-to-date, it was down 15.4% to $425.3 billion NSA from $502.8 billion for the same period a year ago.
Private residential construction spending was at a seasonally adjusted annual rate of $229.6 billion, 2.5% above September’s $224.0 billion, while September’s NSA year-to-date spending dropped 1.1% to $205.4 billion from $207.7 billion for the same period in 2009.
Single-family construction, showing the continuing effects of the drop off in building following the expiration of the home buyer tax credit, consumer uncertainty about the economy, and difficulty in both home buyers and builders obtaining financing, fell 1.2% from September to $105.7 billion, its sixth consecutive monthly decline. However, on a year-to-date basis, it is up 9.3% from a year earlier, to $95.5 billion, a year when single-family construction activity was particularly low. Going forward, beyond improvement in the overall economy and consumer confidence, the health of single-family construction activity will depend to a large extent on access to credit for both buyers (availability of mortgages) and builders (AD&C credit).
Multifamily construction, which has shown improvement over the last few months, rose 3.2% in October to $14.6 billion. However, the severity of the downturn in multifamily construction in the last two years is evidenced by year-to-date spending nose diving 52.8% to $11.9 billion from $25.2 billion for the same period in 2009. Weak demand for condos and high rental vacancy rates, which translated into miniscule rent increases, combined with a harsh financing environment to slow multifamily construction significantly. Now the financing environment is showing spotty improvement, allowing some new projects to go forward. The three-month moving average for multifamily housing starts has been generally rising throughout the course of this year, which is now pushing multifamily construction spending upward, albeit from a low level.
Improvements, which exclude maintenance expenditures and improvement expenditures on rental, vacant, and seasonal properties, rose for the second month in a row following four months of decline. October spending on improvements increased 6.2% to $109.4 billion from September’s $103.0 billion. It was also up 2.9% to $98.0 billion on a year-to-date basis from the same period a year earlier.