Private Residential Construction Spending Grows for Third Straight Month

NAHB analysis of Census data shows that private residential construction spending rose 1.4% in December, marking three months of gains. It stood at a seasonally adjusted annual pace of $911.7 billion. The 2023 annual spending on private residential construction was $864.9 billion, 5.8% lower than the 2022 annual totals.

The monthly increase in total construction spending is attributed to more single-family construction and home improvements. Spending on single-family construction rose 1.6% in December. This is the eighth consecutive monthly increase since April 2023. It is aligned with the strong reading of 1.46 million single-family starts in December, as the lack of existing home inventory is boosting new construction. Compared to a year ago, spending on single-family construction is 9.9% higher. Private residential improvement spending rose 1.7% in December and is 1.4% higher compared to a year ago.  Multifamily construction spending inched up 0.3% in December after an increase of 0.4% in November, as a large stock of multifamily housing is under construction.

The NAHB construction spending index is shown in the graph below (the base is January 2000).  It illustrates how spending on single-family construction experienced solid growth since May 2023 under the pressure of supply-chain issues and elevated interest rates. Multifamily construction spending growth stayed almost unchanged in the last three months, while improvement spending has slowed since mid-2022.

Spending on private nonresidential construction was up 19.1% over a year ago. The annual private nonresidential spending increase was mainly due to higher spending on the manufacturing category ($80.7 billion), followed by the power category ($13.2 billion).