News

New Residential Construction Spending Rises at a Slower Pace in November

0 2948 Market Intelligence

New residential construction spending increased 1.2% on a seasonally adjusted (SA) basis in November after soaring 3.8% in October. Although a solid gain, November marked the first time in eight months that spending increased by less than 1.5%. Not seasonally adjusted (NSA) year-to-date spending was up 18.7% over 2011. Single-family construction spending advanced 1.3% in November after increasing 3.7% in October.

New residential construction spending increased 1.2% on a seasonally adjusted (SA) basis in November after soaring 3.8% in October. Although a solid gain, November marked the first time in eight months that spending increased by less than 1.5%. Not seasonally adjusted (NSA) year-to-date spending was up 18.7% over 2011. Single-family construction spending advanced 1.3% in November after increasing 3.7% in October. Multifamily construction spending moved up 0.7% after jumping 4.1% in October. Year-to-date, single-family construction spending was up 18.6% and multifamily spending was up 19.1% compared to the same period in 2011.

Residential Construction Spending Data
(Billions of Current Dollars)

  Monthly Figures (1)
(latest actual values)
3-Month Moving Average Year-to-Date (NSA)
  Sep-12 Oct-12 Nov-12 Sep-12 Oct-12 Nov-12 Jan-11 to
Nov-11
Jan-12 to
Nov-12
New Single-family 136.4 141.4 143.3 131.9 136.5 140.4 99.9 118.4
  Month-over-Month % Change 3.6% 3.7% 1.3% 2.8% 3.5% 2.9%    
  (Year-over-year % change of NSA data) 25.3% 29.6% 30.2%       -4.6% 18.6%
New Multifamily (2) 28.4 29.6 29.8 28.1 28.7 29.3 20.8 24.8
  1.2% 4.1% 0.7% 1.2% 2.2% 2.0%    
  20.6% 30.9% 29.7%       -6.7% 19.1%
New Residential (3) 164.8 171.0 173.1 160.0 165.2 169.7 120.7 143.2
  3.2% 3.8% 1.2%          
  24.5% 29.8% 30.1%       -5.0% 18.7%
Residential Improvements (4) 132.1 129.7 128.7 129.0 130.3 130.2 106.4 115.8
  2.3% -1.9% -0.7% 1.9% 1.0% -0.1%    
  19.5% 10.7% 6.7%       1.6% 8.8%
Total Residential (5) 296.9 300.7 301.9 289.0 295.5 299.8 227.1 259.0
  2.8% 1.3% 0.4% 2.3% 2.3% 1.5%    
  22.3% 20.2% 19.4%       -2.0% 14.0%

(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
Single-family housing starts shot up 8.1% to 616,000 at a seasonally adjusted annual rate (SAAR), rebounding from November’s 3.2% drop and recording their highest level since June 2008. For 2012, there were 536,000 single-family starts, up almost a quarter (24.4%) from 2011. However, that is less than half of the country’s long-term needs. Even December’s annualized rate, which may have been somewhat inflated by relatively mild weather in much of the country and the seasonal adjustment process, is still less than half of the country’s long-term needs. There is a long way to go before the single-family construction market returns to some semblance of normal.

Single-family building permits increased 1.8% to 578,000 from November’s 568,000, their highest level since June 2008. Meanwhile, the January NAHB/Wells Fargo Housing Market Index (HMI) held steady at 47, maintaining the recent improvement in homebuilders’ outlook.

Multifamily Housing
December multifamily starts jumped 20.3% to 338,000 (SAAR) after falling 6.3% the previous month. Given that these types of large variations are not unusual, the three-month moving average is used to remove some of the noise from the monthly variability to gain a better handle on the underlying strength of multifamily activity. The three-month moving average for December increased a solid 10.2% from November to 306,000, its highest level since August 2008. The three-month moving average of multifamily building permits fell 1.5% to 320,000, a still healthy number and the second highest level (after November’s 325,000 permits) since August 2008.

Residential Construction Data

  Monthly Figures (1)
(latest actual values)
3-Month Moving Average Year-to-Date (NSA) Year-to-Date (NSA)
  Oct-12 Nov-12 Dec-12 Oct-12 Nov-12 Dec-12 Jan-11 to
Nov-11
Jan-12 to
Nov-12
Jan-11 to
Dec-11
Jan-12 to
Dec-12
     Northeast Starts 78 70 85 76 75 78 63 72 68 78
       Month-over-Month
       % Change
1.3% -10.3% 21.4% -3.4% -1.7% 3.6%        
       Year-over-year
       % Change of NSA data
22.4% -28.9% 38.1%       -5.8% 13.6% -5.2% 15.1%
     Midwest Starts 156 158 197 144 154 170 91 117 101 129
  6.1% 1.3% 24.7% 11.6% 6.5% 10.8%        
  50.0% 72.2% 19.6%       -3.0% 28.3% 3.3% 27.4%
     South Starts 438 452 469 411 436 453 287 367 308 399
  4.8% 3.2% 3.8% 7.9% 6.2% 3.9%        
  39.7% 29.6% 48.8%       2.4% 28.1% 3.5% 29.5%
     West Starts 217 171 203 196 196 197 125 162 132 175
  8.0% -21.2% 18.7% 6.1% 0.2% 0.3%        
  67.0% -3.2% 63.3%       11.9% 30.0% 10.3% 31.9%
Total Starts (2) 889 851 954 827 861 898 566 719 609 780
  5.5% -4.3% 12.1% 6.9% 4.1% 4.3%        
  44.7% 19.4% 44.0%       2.4% 26.9% 3.7% 28.1%
     Single-family Starts 589 570 616 572 583 592 400 497 431 536
  -0.2% -3.2% 8.1% 5.1% 1.9% 1.5%        
  39.0% 22.9% 23.5%       -10.1% 24.5% -8.6% 24.4%
     Multifamily 300 281 338 255 278 306 167 221 178 245
  18.6% -6.3% 20.3% 11.4% 9.0% 10.2%        
  57.1% 13.8% 98.3%       53.4% 32.8% 54.0% 37.1%
New Home Sales (3) 361 377 NA 367 371 NA 281 340 305 NA
  -3.5% 4.4%   -0.5% 0.9%          
  16.0% 17.4%         -6.0% 21.0% -5.3%  
Manufactured Home
Shipments
55 56 NA 53 53 NA 48 51 52 NA
  17.7% 1.2%   2.7% -1.0%          
  -5.4% -18.1%         1.1% 7.5% 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
The housing market continues to recover. Housing prices have stopped falling in much of the country and are rising in many metro areas. The October 10-city and 20-city S&P/Case-Shiller® Home Price Index increased 3.4% and 4.3%, respectively, from October 2011. Rising prices prevent more mortgages from sinking underwater and bring some (although a small number at present) back above water. This helps with the foreclosure problem, which has been slowly improving. It also encourages lenders to loosen their lending standards (if only slightly), making more mortgage loans and extending more credit to homebuilders. The rental market continues to look good with vacancy rates falling and rents rising. Mortgage rates remain near historic lows. The Federal Reserve is expected to keep long-term interest rates low through the end of this year and very likely through the end of next year. Thus the outlook for both single-family and multifamily construction is excellent.

New residential construction spending is estimated to increase 19.2% in 2012, and forecasted to increase 21.9% in 2013, and to increase 15.4% in 2014.

Residential Construction Data

  Actual Forecast
  2009 2010 2011 2012 2013 2014
     Northeast Starts 62 72 68 78 93 109
       (Year-over-year % change of NSA data) -48.9% 15.9% -5.4% 14.9% 18.9% 17.8%
     Midwest Starts 97 98 101 129 167 178
  -28.0% 0.8% 3.1% 27.7% 29.7% 6.7%
     South Starts 278 298 308 399 483 538
  -38.6% 6.9% 3.5% 29.5% 21.0% 11.6%
     West Starts 117 120 133 175 228 293
  -40.5% 2.7% 10.5% 31.8% 30.4% 28.6%
Total Starts (1) 554 587 609 780 970 1,119
  -38.8% 5.9% 3.7% 28.1% 24.3% 15.3%
     Single-family Starts 445 471 431 536 642 746
  -28.4% 5.9% -8.6% 24.4% 19.8% 16.2%
     Multifamily Starts 109 116 178 245 328 373
  -61.6% 6.2% 54.0% 37.2% 34.2% 13.6%
New Home Sales (2) (7) 375 323 306 365 422 515
  -22.7% -13.9% -5.3% 19.3% 15.6% 21.9%
Manufactured Home Shipments (7) 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) (7)  
New Single-family 105.3 112.6 108.2 128.8 156.8 181.4
  -43.3% 6.9% -3.9% 19.1% 21.7% 15.7%
New Multifamily (3) 35.9 24.1 22.6 27.1 33.2 37.9
  -30.0% -32.9% -6.0% 19.9% 22.6% 14.1%
New Residential (4) 141.2 136.7 130.8 155.9 190.0 219.3
  -40.4% -3.2% -4.3% 19.2% 21.9% 15.4%
Residential Improvements (5) 112.7 112.5 114.9 123.8 132.8 143.3
  -6.6% -0.2% 2.2% 7.8% 7.2% 8.0%
Total Residential (6) 253.9 249.1 245.7 279.7 322.8 362.6
  -29.0% -1.9% -1.4% 13.8% 15.4% 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.
(7) New Home Sales, Manufactured Home Shipments, and Residential construction spending numbers for 2012 are estimates based on 11 months of data.
Source: Census Bureau, U.S. Department of Commerce. Forecast: Reed Construction Data.

by Bernie Markstein

Leave a comment

Or register to be able to comment.