Multifamily Construction Spending Hits New Record High


NAHB analysis of Census Construction Spending data shows that total private residential construction spending stood at a seasonally adjusted annual rate (SAAR) of $536.7 billion in December. It was down 1.4% for the month after a 3.4% increase in November. Total private residential spending was 3.3% higher in 2018 relative to 2017. Multifamily construction spending hit a new record high, reaching $65.2 billion in December.

(The original text of this paragraph indicated a residential spending decline for 2018 of 1.3% relative 2017. This was incorrect. The 1.3% decline was the December 2018 monthly rate compared to the larger December 2017 rate. Thanks to economists Ed Zarenski and Ken Simonson for noting this issue.)

The monthly decline is largely due to the drop of spending on single-family construction and remodeling. Single-family spending fell 3.2% in December, and was 5.0% lower compared to a year ago. This decline in single-family spending mirrors the steady decline in single-family starts and the weakness of the NAHB/Wells Fargo Housing Market Index (HMI). Spending on improvements slipped slightly 0.4% in December, but it rose by 1.9% over December 2017. Multifamily construction spending increased 3.1% to a $65.2 billion annual pace, reaching a record high.

The NAHB construction spending index, which is shown in the graph below (the base is January 2000), illustrates the strong growth in new multifamily construction since 2010 and a more modest growth in single-family construction and home improvement spending.

Private nonresidential construction spending edged up 0.4% to a rate of $454.5 billion. Moreover, it was 3.4% higher than a year ago. The largest contribution to this year-over-year nonresidential spending increase was made by the class of power facilities ($7.3 billion increase), followed by office ($4.6 billion increase) and manufacturing ($3.6 billion increase).

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