Today’s construction spending release from the Census Bureau revealed a strong 2.8 percent jump in spending on private residential projects during April 2012. The initial estimates for February and March were revised from -2.2% and 0.7% to 0.1% and 0.4%, respectively. Overall, private residential construction spending has increased in each of the last 9 months. New single-family construction activity continued its positive momentum in April, rising 1.8 percent from the previous month and expanding on a month-to-month basis in all but one of the past 11 months. In fact, the dollar value of spending on new single-family homes is at its highest level in two years. Although certainly an improvement from the depressed levels of 2009, until 1) the labor market recovery gains any serious traction, 2) lending standards are less stringent and 3) the glut of distressed properties is worked off, gains in homebuilding activity will remain modest.
Multifamily registered the strongest gain of any category during April, notching a 4.1 percent increase over March and a robust 31 percent rate of growth on a year-over-year basis. Apartment demand has picked up over the past few years as the share of newly-formed households entering the rental market has risen appreciably. The rental vacancy rate slid to a nearly decade low and the absorption rate jumped to its highest level since 2005. Starts of 5+ unit structures have stayed above an annualized rate of 200,000 in each of the last three months while building permits have exceeded that level in each of the last six months. Finally, the home improvement component of construction spending proved volatile yet again, gaining 3.7 percent in April after posting a 2.9 percent estimated decline during the previous month. On a 3-month moving average basis, remodeling spending activity has held in a fairly tight range since late 2011, a result that is generally in line with NAHB’s most recent release of the Remodeling Market Index.