Residential Construction Spending Climbs to 4-year High

Private residential construction spending surged 3% on a month-to-month basis in October 2012. The initial estimate for September was revised downward from a 2.8% gain down to a 1.1% rate of growth; however, this was more than offset by an upward bump in the previously reported estimate for August from 1.2% to 2.8%. Following increases in 14 of the last 15 months, nominal spending on private residential construction activity is at its highest dollar value since late 2008. In addition, spending has risen 32% above the trough registered during the third quarter of 2010.

New single-family homes continued to post solid rates of growth, increasing 3.6% on a month-to-month basis for the second month in a row. Spending is also 29% above its year-ago level and has climbed 55% since bottoming out in mid-2009. This latest print on construction spending merely confirms the firming recovery for new single-family home construction that has been observed via housing starts and the HMI. With permit authorizations climbing rapidly and hitting their highest levels since the summer months of 2008, we anticipate this robust pace of growth in construction activity to continue over the near term.

construction spending

The positive momentum continued for the multifamily sector, notching its 13th consecutive monthly increase with a 6.2% gain over September 2012. Overall, the dollar value of multifamily construction activity has surged more than 82% from its cyclical low observed just two years ago, due in part to strong growth in renter demand. Multifamily starts have averaged better than 230,000 units over the duration of 2012 and given that permits have averaged approximately 280,000 units during the same time period, multifamily construction spending will likely rise further in the coming months.

Home improvement activity expanded 1.8% during October 2012, offsetting the downward revision of a 1.2% decline posted for September. Using the 3-month moving average to iron out some of the volatility in this metric, nominal remodeling spending has reached its highest point in five years. NAHB’s own Remodeling Market Index (RMI) has pointed to an even stronger assessment of current market conditions by professional remodelers as the RMI reached 50 for the first time since 2005.

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8 Responses to Residential Construction Spending Climbs to 4-year High

  1. John White says:

    The tremendous growth in multi-family construction is largely due to increased demand for apartment units. Growth in multi-family is almost double the growth in single family construction and this leads me to believe that a smart builder would be building condo units to rent now at great prices and sale when the market improves.

  2. [...] Despite less than robust economic conditions, home building economic data have been fairly positive for 2012. For example, the level of residential construction spending is at a four-year high. [...]

  3. [...] one month of preliminary data needs to be taken with caution, increases in housing construction suggest that employment levels should be higher than other data sources [...]

  4. [...] one month of preliminary data needs to be taken with caution, increases in housing construction suggest that employment levels should be higher than other data sources [...]

  5. [...] a result of growing breadth of the housing recovery, private residential construction spending increased 3% on a month-to-month basis in October, reaching its highest dollar value since late 2008. New single-family homes continued to post solid [...]

  6. [...] View this original post on the NAHB blog, Eye on Housing. [...]

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