November Single-family Residential Construction Spending Rises for the First Time since April


Residential construction spending increased for the third month in a row in November, this time with contributions to spending from all three sectors of residential construction—single-family construction, multifamily construction and improvements.

The U.S. Census Bureau released November construction spending data today. Total nominal construction spending was at a seasonally adjusted annual rate (SAAR) of $810.2 billion, up 0.4% (which, however, is unchanged from October on a statistical basis) from the revised October estimate of $806.7 billion, and 6.0% below the year earlier reading of $861.5 billion. During the first eleven months of this year on a not seasonally adjusted (NSA) basis, total construction spending totaled $753.9 billion, 10.6% below the $843.1 billion for the same period in 2009.

Spending on private construction was $491.8 billion SAAR, essentially flat from October’s $490.5 billion. Year-to-date, it was down 14.8% to $468.2 billion NSA from $549.7 billion for the same period a year ago.

Private residential construction spending was at a seasonally adjusted annual rate of $235.7 billion, statistically unchanged from October’s $234.1 billion, while November’s NSA year-to-date spending dropped 1.2% to $225.4 billion from $228.2 billion for the same period in 2009.

Single-family construction finally showed signs of recovery from the drop off in building following the expiration of the home buyer tax credit—its first monthly increase since April, rising 0.6% from October to $107.1 billion (SAAR). On a year-to-date basis, it is up 8.1% from a year earlier, to $104.9 billion (NSA). The NAHB forecast is for single-family housing starts to increase significantly this year and next, though from a low level that still leaves starts below the long-term needs of the economy. Nonetheless, increased single-family housing starts will translate into increased single-family construction spending, adding to economic growth. 

Multifamily construction, which appeared to have stumbled in October falling 1.6% based on a revised number, rebounded 3.0% in November to $14.0 billion. Despite recent improvement in the multifamily market, the severity of the downturn in multifamily construction in the last two years is evidenced by the year-to-date spending drop of 51.8% to $12.9 billion from $26.8 billion for the same period in 2009. Weak demand for condos and high rental vacancy rates combined with a harsh financing environment to slow multifamily construction significantly. The three-month moving average for multifamily housing starts, which had been generally rising throughout the course of this year, fell in October and November. As a result, we can expect multifamily construction spending to slow in coming months. The NAHB forecast is for improvement in multifamily starts throughout 2011 and 2012. Thus any slowdown in multifamily construction spending should prove relatively brief.

Improvements, which exclude maintenance expenditures and improvement expenditures on rental, vacant, and seasonal properties, rose for the third month in a row following four months of decline. November spending on improvements increased 0.4% to $114.6 billion from October’s $114.1 billion. On a year-to-date basis improvements were up 3.1% to $107.6 billion from the same period a year earlier.

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