Private Residential Spending Declined in May; Significant Revisions for Improvement Spending


NAHB analysis of the Census Construction Spending data shows total private residential construction spending stood at a seasonally adjusted annual rate (SAAR) of $535.9 billion in May. It was down 4.0% in May, after a 5.1% decline in April, due to the economic consequences of the COVID-19 lockdowns. On a year-over-year basis, however, total private construction spending inched up 0.7%.

The monthly declines are largely attributed to the slowdown of spending on single-family. Spending on single-family construction slid down 8.5% in May to a seasonally adjusted annual rate of $261.8 billion, after a decrease of 7.0% in April. Multifamily construction spending rose 2.3% in May, following a plunge of 7.3% of in April. Private residential improvements, which include spending on remodeling, major replacements, and additions to owner-occupied housing units, edged up 0.1% at a $196.8 billion annual pace in May.

The NAHB construction spending index, which is shown in the graph below (the base is January 2000), illustrates the solid growth in single-family construction and home improvement from the second half of 2019 to February 2020, before the COVID-19 hit the U.S. economy. New multifamily construction spending has slowed since August 2019, after strong growth from 2010 to 2016 and a surge from late 2018 to early 2019.

The Census Bureau also published significant revisions on private residential spending, multifamily and home improvement spending categories. The estimates for multifamily and total private residential spending were revised upward since 2009. The chart below shows revised residential improvement spending diverged noticeably from the third quarter of 2018 onward. The previous data had a steep decline in October 2018 and a quick recovery followed by flattening until the first half of 2019. In contrast, the decrease in the revised data was shallower and started to pick up faster in the first quarter of 2019.

Spending on private nonresidential construction declined 3.4% in May on an annual basis to a seasonally adjusted annual rate of $465.3 billion. The annual nonresidential spending decline was mainly due to less spending on the class of manufacturing ($8.6 billion), followed by the lodging ($4.7 billion), and office category ($4.5 billion).

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