As mortgage rates reached 3-year high, private residential construction spending decreased 1.6% to a seasonally adjusted annual rate (SAAR) of $923.7 billion in June, according to NAHB’s analysis of the Census Construction Spending data. It was the first decline since May 2020. On a year-over-year basis, total private construction spending was 15.6% higher.
The monthly declines are largely attributed to lower spending on single-family and improvement. Spending on single-family construction dropped 3.1% in June, as housing starts fell to a two-year low and builder confidence plunged in June with home building facing higher interest rates and construction costs. Private residential improvements inched down 0.3% in June. Multifamily construction spending increased 0.4% in June after a dip of 0.35% in May, and it was 0.1% lower from a year ago.
The NAHB construction spending index, which is shown in the graph below (the base is January 2000), illustrates how construction spending on single-family, multifamily have slowed down the pace since early 2022 under the pressure of supply-chain issues and elevated interest rates. Before the COVID-19 hit the U.S. economy, single-family construction and home improvement experienced solid growth from the second half of 2019 to February 2020, and the quick rebound since July 2020.
Spending on private nonresidential construction decreased 0.5% in June to a seasonally adjusted annual rate of $492.7 billion. The monthly nonresidential spending decrease was mainly due to more spending on the class of power ($1.7 billion), followed by the commercial category ($0.6 billion), and healthcare category ($0.4 billion).