Private residential construction spending began the year on a positive note. The US Census Bureau release of January construction spending indicated that private residential construction spending rose 5.3% to $245.6 billion from an upwardly revised $233.2 billion in December. 

The rise in residential construction spending was driven mainly by the remodeling sector, with home improvement spending rising 10.5% to 124.4 billion. This increase coincides with the strong rise in existing homes sales since August. NAHB research has shown homeowners typically invest in alterations and additions soon after purchase, making changes to suit their individual tastes and needs. Therefore, home improvement spending follows a similar trend to existing home sales.

 Spending on single-family construction rose a modest 0.8% to $108.1 billion, while spending on multifamily construction was down 2.9% to $13.0 billion. Spending on single-family construction has been inching up since November, but the overall improvement has been modest.  Multifamily construction expenditure has been weak, with a steady decline since September.

The home buyer tax credit (HBTC) program has greatly influenced private residential construction spending over the past year, with strong gains in single-family construction expenditure and expenditure on home improvements prior the conclusion of the program in April 2010, followed by a sharp decline in the subsequent months. Multifamily construction expenditure has been less affected by the HBTC, as the multifamily sector is dominated by rental housing. The recent improvement in single-family construction expenditure and expenditure on home improvements indicates that the influence of the HBTC is fading.

Despite the improvement in private residential construction spending, total nominal construction spending fell 0.7% in January, to a seasonally adjusted annual rate (SAAR) of $791.8 billion.  This follows a 1.6% decline to an upwardly revised $797.6 in December.

The downturn was centered on private non-residential construction spending, which fell 6.9% to $244.4 billion from $262.7 billion in December.  This was driven mainly by an 11.8% decline in spending on power generation construction and 9.7% decline in spending on healthcare construction.   The sharp decline in January has pushed the level of private non-residential construction expenditure below private residential construction expenditure for the first time since December 2007.