Private Residential Construction Spending Hits a Two-Year High

The Census Bureau reported that private residential construction spending activity increased 1.8% during January. The preliminary estimate for December was boosted higher to show a 1.5% gain, versus the originally reported increase of 0.8%. After falling in July 2010 to its lowest reading since mid-1995, spending on private residential construction projects has increased in each of the last six months—rising to its highest dollar value since January 2010.

Spending on new single-family home construction climbed 2.5% versus December 2011. In addition, the level of spending activity has increased in each of the last eight months and on a year-over-year basis this category has registered a gain of 5.5%. Although this improvement is modest, the sustained period of growth corroborates the mounting evidence from indicators such as the Wells Fargo/NAHB HMI, new construction starts and home sales that the housing market might have found that elusive recovery. The recent quickening in the pace of new job growth and still-high levels of housing affordability should only bode well for additional growth in single-family construction activity over the near term; however, tight mortgage lending standards and competition from distressed property sales will remain a limiting factor going forward.

Multifamily construction spending ticked higher by 0.7% in January. While month-to-month fluctuations for this category have been more volatile, the level of spending has certainly trended higher during the past year with a 20% increase versus January 2011. Authorized multifamily (5+ units) building permits remained above 200,000 annualized units for the third consecutive month in January 2012, pointing to likely gains in spending over the near term.

The home improvement component of construction spending increased for the sixth consecutive month during January, gaining 1.3% on a month-to-month basis. Overall, remodeling did not endure the same degree of decline in activity when compared to new construction for single-family and multifamily projects. In fact, during 15 of the last 16 months, the level of home improvement spending has exceeded that of new single-family homes. A combination of tax credits for retrofitting homes with energy efficiency equipment and rehabilitation/repair work on distressed properties has likely bolstered demand for home improvement spending.

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7 Responses to Private Residential Construction Spending Hits a Two-Year High

  1. [...] You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own [...]

  2. tinagleisner says:

    Your chart is fascinating, showing typical spend for new construction at 3 times that of remodeling. As the housing bubble has slowed the sale of homes (new or old), I wonder if this ratio will change with more people staying in existing homes with improvements.

  3. I don’t understand why new construction isn’t taking a nose dive. There are way too many homes being dumped on the market from foreclosures, for it to be cost effective to build new homes. You can buy a pre-owned home for 60% of what it costs to build a new one…

    I’m still building custom homes, and have a couple in the works right now, so you’re right, building is up, but I wouldn’t have the guts to build any specs right now.

    Kent

  4. [...] Richard Warren Spending on residential construction projects nationwide has increased in each of the last six months, according to Census Bureau numbers reported by the National Association of Home Builders (NAHB). [...]

  5. [...] Read more from the National Association of Homebuilders (NAHB) website. This entry was posted in Announcements, Customers, News Coverage, Press Releases and tagged home renovation news, remodeling news by todd. Bookmark the permalink. « Back to all posts Take the i360 TourControlling Chaos [...]

  6. Paul @ Decon says:

    Very Interesting speculation. Home Improvement is very important to maintain the health of the property. Properties should get assessed for Asbestos and Mould every few years.

  7. […] Private Residential Construction Spending Hits a Two-Year High […]

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