Residential Construction Spending Rises for Eighth Consecutive Month

Spending on private residential construction activity ticked 0.4% higher on a month-to-month basis during November 2012. October’s preliminary reading of a 3% gain was bumped down to a 1.3% increase, but at the same time the initial estimate for September was pushed upward from 1.1% to 2.9%. Spending has increased in each of the last 8 months (and 15 of the last 16), rising to a 4-year high and nearly 33% above the trough during the third quarter of 2010.

New single-family home construction led the way in terms of spending growth among the private residential categories during November, posting a 1.3% increase versus October. Spending has climbed more than 29% above its nominal level of a year ago and stands 57% higher compared to the trough in mid-2009. A softer reading on single-family housing starts might point to some potential weakness in spending on this category going forward, but a 2-point increase in NAHB’s HMI and another strong reading on permit authorizations point to stronger construction activity (and by extension spending) over the near term.

construction spending

The multifamily construction sector registered its slowest rate of month-to-month growth in nearly a year, but November’s 0.5% still marked the 14th month in a row spending activity has increased. In the past year, nominal spending on multifamily projects has jumped 46% and stands nearly 83% higher than the low posted in August 2010. Starts of multifamily dwellings have averaged over 250,000 units for the past six months and approached 300,000 during the past two months. The current forecast calls for a modest slowdown in starts during the first quarter that will likely be followed by gains through the end of 2014–a pattern that can be expected for construction spending in this sector.

Spending on home improvements dipped 0.7% in November, adding to the 1.9% contraction (revised downward from a 1.8% gain) reported for October. Expressed as a 3-month average (so as to smooth out monthly volatility), nominal spending on remodeling activity has hovered around a 5-year high for the past few months. NAHB’s 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. Our forecast calls for steady gains in remodeling activity through the end of 2014.



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3 replies

  1. This is all smoke and mirrors. Most of this “recovery” entails investors that are now starting to bail. The real gauge of a recovery is first time buyers. They account for only 30% of this so-called recovery. Interest rates are pathetically low and simply cannot stay that way forever. The Fed’s QE has to “taper” at some point which will lead to a drastic reduction in the supposed great stock market that exists, including home builder stocks. The home improvement sector will suffer 2007-2008 type losses. Mom and pops will go under or see drastically reduced profits. And, when you say the average remodeling co. brings in revenue of 1.1 million – Are you talking about mom and pops (or in the new p.c. vernacular, (“copreneurs” )? That simply does not make sense. This housing recovery is going to crash and take a lot of related small businesses down with it. People see what they want to see until the bottom falls out. Mom and pop shop owners in the industry will be going under and divorcing in record numbers. We need to wake up instead of simply going along with the giant, delusional lie spawned by creative juggling of numbers and statistics.

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