Residential Construction Spending Surges on New Construction and Remodeling

Private residential construction spending jumped 2.8% on a month-to-month basis during September 2012. The preliminary estimates for July and August were revised higher as well, from previous prints of -0.1% and 0.9% to 1.3% and 1.2%, respectively. Nominal spending activity on private residential construction has expanded in 13 of the last 14 months, putting it nearly 21% above September 2011 and at its highest dollar value since the end of 2008.

The new single-family homes spending category saw growth accelerate in September, gaining 3.9% from the previous month and 26% from last year. Save for a one month downward blip in March 2012, construction spending on new single-family housing has increased solidly since last summer and risen more than 50% since hitting rock bottom during the second quarter of 2009. Data sources such as housing starts and NAHB’s own HMI continue to offer evidence that construction of new single-family homes is on the mend and given that building permits are at their highest level since mid-2008, construction activity is expected to rise for the foreseeable future.

Multifamily construction spending registered its 12th consecutive month-to-month increase, gaining 1.3% over August 2012. Although the multifamily sector has posted the largest percentage increase in spending activity compared to its cyclical low (73%), the overall trend in spending growth has slowed in each of the last three months. While this might represent a lull, spending should continue to expand over the near term as multifamily starts have exceeded 200,000 units in 8 of the last 9 months and permits for 5+ units surged to a four-year high in September.

Nominal spending on home improvement activity increased 2%, more than recouping the 1.1% month-to-month drop that was reported in August. While remodeling has bounced around for much of the past two years, the level of spending activity has trended appreciably higher over the past few months and is now sitting at a 4-year high. Indeed, NAHB’s Remodeling Market Index (RMI) indicated professional remodelers’ perceptions of current market conditions are at their highest levels since 2005.



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