After three consecutive months of slight declines, private residential construction spending increased 2.2% on a month-to-month basis in February. Despite the sluggish readings from the prior 3 months, nominal spending on residential construction activity remained more than 20% above its year-ago level and roughly 36% higher than the cyclical low in mid-2011.
The new single-family home category continued to show strength in February, gaining 4.3% versus January. Compared to February 2012, spending on new single-family homes has risen 34%, but perhaps more importantly, the level of nominal construction spending has surged more than 73% since bottoming out in mid-2009. Spending activity will likely expand further over the next two years as the current NAHB forecast calls for single-family housing starts to increase 23% and 29%, respectively, this year and next.
The multifamily sector took a step back in February, with spending on new multifamily projects slipping 2.2% from January. In fact, this marks the first outright month-to-month decline for this category since September 2011. Still, the overall trend remains decidedly positive for new multifamily construction activity as the level of spending is 52% ahead of the pace in February 2012 and has more than doubled the August 2010 low point. After a likely modest retrenchment in the first quarter of 2013, the baseline forecast calls for consistent gains in multifamily starts through the end of 2014.
Home improvement spending improved slightly in February, gaining 0.5% versus the previous month and is 1.1% above the level from last year. Although this construction spending category is the most volatile and likely to be revised, the 3-month moving average suggests spending on remodeling activity has cooled over the past several months. Nonetheless, with existing home sales expected to register steady growth going forward, home improvement activity should see a similar pattern as sellers spruce up their homes for sale and/or buyers decide to make changes after they move into the home.