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New Residential Construction Spending Advances for the Sixth Consecutive Month

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Marking the sixth consecutive month of increases, new residential construction spending soared 3.3% on a seasonally adjusted (SA) basis in September following an almost as strong 3.0% rise in August. Not seasonally adjusted (NSA) year-to-date spending was up 16.1% from the same period in 2011. Single-family construction spending jumped 3.9% in September following a 3.4% advance in August.

Marking the sixth consecutive month of increases, new residential construction spending soared 3.3% on a seasonally adjusted (SA) basis in September following an almost as strong 3.0% rise in August. Not seasonally adjusted (NSA) year-to-date spending was up 16.1% from the same period in 2011. Single-family construction spending jumped 3.9% in September following a 3.4% advance in August. Multifamily construction spending rose a relatively modest 0.7% after improving 1.3% in August. Year-to-date, single-family construction spending increased 15.9% and multifamily spending increased 16.7% over the same period a year ago.

Residential Construction Spending Data
(Billions of Current Dollars)

  Monthly Figures (1)
(latest actual values)
3-Month Moving Average Year-to-Date (NSA)
  Jul-12 Aug-12 Sep-12 Jul-12 Aug-12 Sep-12 Jan-11 to
Sep-11
Jan-12 to
Sep-12
New Single-family 127.7 132.0 137.1 125.0 128.4 132.3 80.2 93.0
  Month-over-Month % Change 1.7% 3.4% 3.9% 2.2% 2.7% 3.0%    
  (Year-over-year % change of NSA data) 18.6% 21.2% 25.8%       -6.5% 15.9%
New Multifamily (2) 27.7 28.1 28.3 27.2 27.7 28.0 16.9 19.8
  1.0% 1.3% 0.7% 2.8% 2.2% 1.0%    
  24.4% 18.7% 20.6%       -6.8% 16.7%
New Residential (3) 155.4 160.1 165.3 152.2 156.1 160.3 97.2 112.8
  1.6% 3.0% 3.3%          
  19.6% 20.8% 25.0%       -6.5% 16.1%
Residential Improvements (4) 125.8 124.4 126.8 123.8 125.0 125.7 84.5 91.0
  0.8% -1.1% 2.0% 2.8% 1.0% 0.6%    
  27.0% 15.1% 12.5%       0.9% 7.6%
Total Residential (5) 281.2 284.4 292.2 275.9 281.1 285.9 181.7 203.8
  1.2% 1.2% 2.7% 2.5% 1.9% 1.7%    
  22.9% 18.1% 19.4%       -3.2% 12.1%

(1) Monthly levels are seasonally adjusted at annual rates (SAAR figures).
(2) New Multifamily = New Private Multifamily + New Public Multifamily - Public Improvements (estimated by Reed Economics)
(3) New Residential = New Single-family + New Multifamily
(4) Residential Improvements include remodeling, renovation and replacement work. Number also includes RCD estimate of improvements to public housing.
(5) Total Residential = New Single-family + New Multifamily + Residential Improvements. Total may not equal the sum of its components due to rounding.
Source: Census Bureau, U.S. Department of Commerce. Calculations: Reed Construction Data

Single-Family Housing
October single-family housing starts slipped 0.2% to 594,000 at a seasonally adjusted annual rate (SAAR), essentially unchanged from September’s 595,000 starts. September’s starts had skyrocketed 10.6% from August’s 538,000 starts.

Single-family building permits rose 2.2% to 562,000, their highest level since July 2008, from September’s 550,000. The November NAHB/Wells Fargo Housing Market Index (HMI), jumped 5 points to 46, its highest level since May 2006. Increases in the HMI have been strongly correlated with increased housing starts one to two months later.

Multifamily Housing
For the second month in a row multifamily starts registered a strong increase. October multifamily starts jumped 11.9% to 300,000 (SAAR), following a 26.4% surge in September to 268,000. However, since multifamily starts are highly volatile from month to month, the three-month moving average is often used to better gauge multifamily activity. The three-month moving average for October was 260,000, up 11.1% from September and its highest level since September 2008. The average has been above 200,000 starts for a year. Meanwhile, October’s three-month moving average of multifamily building permits of 311,000 was also at its highest level since September 2008.

Residential Construction Data

  Monthly Figures (1)
(latest actual values)
3-Month Moving Average Year-to-Date (NSA) Year-to-Date (NSA)
  Aug-12 Sep-12 Oct-12 Aug-12 Sep-12 Oct-12 Jan-11 to
Sep-11
Jan-12 to
Sep-12
Jan-11 to
Oct-11
Jan-12 to
Oct-12
     Northeast Starts 74 77 72 79 79 74 50 60 56 66
       Month-over-Month
       % Change
-14.0% 4.1% -6.5% -0.8% -0.4% -5.9%        
       Year-over-year
       % Change of NSA data
32.7% 32.7% 13.8%       -7.9% 19.0% -9.7% 18.5%
     Midwest Starts 130 146 159 113 129 145 74 90 84 105
  17.1% 12.3% 8.9% 6.9% 14.2% 12.4%        
  50.0% 42.1% 53.0%       -3.4% 20.9% -1.5% 24.7%
     South Starts 376 442 431 363 389 416 234 299 261 336
  8.0% 17.6% -2.5% 1.0% 7.0% 7.1%        
  22.4% 35.7% 38.2%       -1.9% 27.6% 0.2% 28.7%
     West Starts 170 198 232 188 184 200 101 132 112 151
  -7.1% 16.5% 17.2% 2.4% -2.5% 8.9%        
  17.9% 19.9% 80.2%       4.8% 29.9% 7.2% 34.7%
Total Starts (2) 750 863 894 744 780 836 460 580 513 658
  3.0% 15.1% 3.6% 2.0% 4.9% 7.1%        
  26.6% 32.3% 46.4%       -1.5% 26.2% 0.1% 28.3%
     Single-family Starts 538 595 594 525 546 576 331 407 367 458
  6.3% 10.6% -0.2% 1.6% 4.1% 5.4%        
  25.1% 38.3% 40.3%       -12.0% 23.1% -10.9% 24.8%
     Multifamily 212 268 300 219 234 260 129 173 146 200
  -4.5% 26.4% 11.9% 3.0% 6.8% 11.1%        
  30.5% 21.9% 59.4%       41.2% 34.0% 44.9% 37.0%
New Home Sales (3) 366 369 368 364 367 368 233 283 258 312
  0.0% 0.8% -0.3% -0.3% 0.8% 0.2%        
  24.0% 20.8% 16.0%       -9.0% 21.5% -7.5% 20.9%
Manufactured Home
Shipments
57 47 NA 53 52 NA 37 42 42 NA
  12.9% -18.4%   1.0% -2.6%          
  7.6% -13.1%         -7.3% 13.1% -3.1%  

Housing starts, home sales, and manufactured home shipments are all in thousands.
(1) Monthly levels are seasonally adjusted at annual rates (SAAR figures).
(2) Total may not equal the sum of its components due to rounding.
(3) Based on a survey of homebuilders; excludes homes built under contract and multi-family rental units.
Source: Census Bureau, U.S. Department of Commerce. Calculations: Reed Construction Data

Outlook for Residential Construction
Overall, the outlook for the housing market is for continued improvement.

  • Although foreclosures remain high they are trending downward and their negative impact on most local housing markets has been decreasing
  • Single-family housing prices have been moving higher in many of these markets, bolstering the confidence and willingness of prospective buyers to make a home purchase and of lenders to issue mortgages to buyers
  • Strong demand for rental housing along with rising rents supports multifamily construction projects
  • Interest rates continue to hover around their historic lows making purchasing a home or condo more affordable for those who qualify and improving projected returns on single-family and multifamily projects
  • Even though lending standards continue to be more restrictive than they were in “normal” times, lenders have moved towards somewhat less restrictive requirements in recent months

The housing construction forecast assumes the continuation of better economic growth and employment, low interest rates, declining vacancy rates, and rising rents. The new residential construction spending forecast is for an increase of 18.4% in 2012, 19.7% in 2013, and 15.4% in 2014.

Residential Construction Data

  Actual Forecast
  2009 2010 2011 2012 2013 2014
     Northeast Starts 62 72 68 78 91 107
       (Year-over-year % change of NSA data) -48.9% 15.9% -5.4% 15.5% 15.8% 18.2%
     Midwest Starts 97 98 101 125 165 176
  -28.0% 0.8% 3.1% 24.2% 31.6% 6.8%
     South Starts 278 298 308 398 461 516
  -38.6% 6.9% 3.5% 29.1% 15.8% 12.1%
     West Starts 117 120 133 181 263 328
  -40.5% 2.7% 10.5% 36.5% 45.2% 24.8%
Total Starts (1) 554 587 609 782 979 1128
  -38.8% 5.9% 3.7% 28.4% 25.2% 15.2%
     Single-family Starts 445 471 431 539 658 761
  -61.6% 6.2% 54.0% 36.4% 31.9% 14.4%
     Multifamily Starts 109 116 178 243 321 367
  -28.4% 5.9% -8.6% 25.2% 22.1% 15.6%
New Home Sales (2) 375 323 306 373 445 538
  -22.7% -13.9% -5.3% 21.8% 19.4% 20.8%
Manufactured Home Shipments 50 50 52 55 62 70
  -39.2% 0.5% 3.1% 7.2% 11.6% 13.4%
     Residential Construction Spending (Billions of Current Dollars)  
New Single-family 105.3 112.6 108.2 128.0 152.7 176.7
  -43.3% 6.9% -3.9% 18.3% 19.4% 15.7%
New Multifamily (3) 35.9 24.1 22.6 27.0 32.7 37.3
  -30.0% -32.9% -6.0% 19.2% 21.1% 14.1%
New Residential (4) 141.2 136.7 130.8 154.9 185.4 214.0
  -40.4% -3.2% -4.3% 18.4% 19.7% 15.4%
Residential Improvements (5) 112.7 112.5 114.9 122.7 132.4 142.9
  -6.6% -0.2% 2.2% 6.8% 7.9% 8.0%
Total Residential (6) 253.9 249.1 245.7 277.6 317.8 356.9
  -29.0% -1.9% -1.4% 13.0% 14.5% 12.3%

Housing starts, home sales, and manufactured home shipments are all in thousands.
(1) Total starts may not equal sum of regions due to rounding.
(2) Based on a survey of homebuilders; excludes homes built under contract and multi-family rental units.
(3) New Multifamily = New Private Multifamily + New Public Multifamily - Public Improvements (estimated by Reed Economics)
(4) New Residential = New Single-family + New Multifamily
(5) Residential Improvements include remodeling, renovation and replacement work.
Number also includes RCD estimate of improvements to public housing.
(6) Total Residential = New Single-family + New Multifamily + Residential Improvements.
Total Residential may not equal the sum of its components due to rounding.
Source: Census Bureau, U.S. Department of Commerce. Forecast: Reed Construction Data.

by Bernie Markstein

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