Private residential construction spending increased 0.9% on a month-to-month basis during August 2012. In addition, estimates for both June and July were revised upward strongly from initial readings of 2.4% and -1.6% to 3.3% and -0.1%, respectively. The nominal level of private residential construction spending has improved significantly over the past year, rising nearly 18% since last August and reaching its highest mark since early 2009.
Spending on new single-family homes jumped 2.8% and has registered sequential gains in 14 of the last 15 months, which leaves the level of spending almost 21 percent ahead of its year-ago level. Compared to the cyclical low observed in the second quarter of 2009, spending activity has rebounded approximately 44 percent.
The improvement in spending has been expected given the solid increases observed in starts and NAHB’s own HMI. Going forward, with single-family building permits averaging more than 500,000 (annualized) during the last four months, additional growth in new home construction is likely. In fact, the forecast calls for starts of new single-family homes to increase at a solid clip through the end of 2013, which should ultimately translate into sustained upward momentum in spending.
The multifamily side of the market has staged the strongest rebound over the past year, and that trend continued into August as nominal spending climbed 3.7% from July. After bottoming out two years ago, nominal spending on new multifamily housing has surged more than 76%. The rate of growth in new multifamily construction is expected to trail what was observed in late-2011 and early 2012, but with 5+ permits having averaged nearly 250,000 units since the beginning of the year, construction (and spending) activity will remain at a high level going forward.
Home improvement spending declined for the second consecutive month, falling 2.2% versus July. Nominal spending on home improvements has trended slightly higher over the last 12 months, but the overall pattern from the past two+ years has been for remodeling activity to bounce around a relatively close range. Still, this steady pace of activity provided some measure of optimism as the single- and multifamily segments of the construction sector emerged from sustained periods of weakness.