Residential construction spending fell in December after three monthly increases in a row due to declines in multifamily construction and improvements spending.
The U.S. Census Bureau released December construction spending data today. Total nominal construction spending was at a seasonally adjusted annual rate (SAAR) of $787.9 billion, down 2.5% from the revised November estimate of $807.8 billion. For the year, total construction spending totaled $814.2 billion, 10.3% below the $907.8 billion for 2009.
December spending on private construction was $486.9 billion SAAR, down 2.2% from November’s $498.0 billion. For 2010, it dropped 14.3% to $507.3 billion from 2009’s $592.3 billion.
Private residential construction spending was at a seasonally adjusted annual rate of $226.4 billion, down 4.1% from November’s $236.1 billion. On a statistical basis, 2010 private residential construction spending of $241.4 billion was unchanged from 2009’s $245.6 billion.
Single-family construction held its own, rising 0.5% from November to $107.4 billion (SAAR). For 2010, it was up 7.1% from 2009, to $112.8 billion. The NAHB forecast is for single-family housing starts to improve significantly this year and next, though from a low level that still leaves starts below the long-term needs of the economy. Nonetheless, increased single-family housing starts will translate into increased single-family construction spending, adding to economic growth.
Multifamily housing starts, which appeared to have been on a positive trajectory in the first three quarters of 2010, stumbled in the fourth quarter, down 33% from the third quarter (SA). Multifamily construction spending had a saw tooth pattern in the second half of the year—up one month, down the next. After rising 4.2% in November, it fell 5.3% in December to $13.4 billion. Average multifamily construction spending was up a slight 0.7% in the fourth quarter to $13.7 billion from third quarter’s $13.6 billion. The downturn in the multifamily market is made painfully clear by the 50.5% plunge in multifamily construction spending from 2009’s $28.2 billion to 2010’s $14.0 billion.
One bright spot for the multifamily construction market is that fourth quarter rental vacancy rates fell to their lowest level since first quarter 2003 (see our commentary on the rates). This, along with an improving economy, should help move new multifamily projects forward. The NAHB forecast is for improvement in multifamily starts throughout this year and next, though again below the country’s long-term needs, which will translate in increased multifamily construction spending.
Improvements, which exclude maintenance expenditures and improvement expenditures on rental, vacant, and seasonal properties, fell 8.3% to $105.7 billion (SAAR) in December after rising for three straight months following four months of decline. For 2010, improvements were up 2.3% to $114.6 billion from $112.0 billion in 2009.