Construction Forecasts

News & Analysis

Residential Construction Spending Increased 2.4% in March

05/10/2011 by Jim Haughey, RCD Chief Economist

New residential construction spending fell 0.5% in March but permits, starts and sales all posted double-digit gains. This signals a pickup in jobsite spending in the spring. Single family spending has been about steady for eight months while multi family spending, mostly for condos, has continued to decline. But the recent surge in multi family permits and favorable turnabout in rent and vacancy rates will stop the long slide in multi family construction during the spring.

Construction spending for residential remodeling increased 5.9% in March. While the month to month gain is implausible, there is reason to believe that the remodeling market is recovering. It is expected to be much larger by yearend when existing home sales, consumer income and consumer confidence are all higher

The restraints on housing are gradually lessening. This includes the surplus of available or soon to be available homes fore sale, the flow of homes into the default phase and the number of households locked out of the mortgage market.

The recent turn to much weaker home prices overstates the weakness of the single family and condo markets. It is the result of a bunching up of lender sales of foreclosed homes caused by sales moratoriums while legal paperwork problems were cleared up.

The forecast is for residential construction spending to expand 1.9% in 2011 and 25.7% in 2012.

U.S. Residential Building Construction
(thousands of units)

  Monthly Figures (1)
(latest actual values)
Annual Figures
  Actual Forecast
  Feb-11 Mar-11 2007 2008 2009 2010 2011 2012
Northeast starts (% change is period
versus same period, previous year)
72 59 143 120 61 72 84 117
-22.2% -10.6% -16.6% -16.3% -48.7% 16.6% 17.8% 38.6%
Midwest 105 82 206 137 95 97 93 147
  -41.0% -11.8% -27.6% -33.7% -30.7% 2.5% -4.8% 58.6%
South 285 297 676 451 281 296 349 553
  7.7% -12.4% -25.9% -33.3% -37.7% 5.4% 17.8% 58.6%
West 143 111 317 195 117 120 141 220.25
  -39.2% -18.4% -28.5% -38.5% -40.1% 3.0% 17.2% 56.1%
Total 605 549 1,342 909 554 585 667 1037
  -15.4% -13.4% -25.9% -32.3% -39.0% 5.6% 13.9% 55.5%
Total Single-family 527 422 1,036 616 442 472 503 813
  -25.6% -21.1% -29.7% -40.5% -28.2% 6.6% 6.7% 61.5%
Total Multi-family 78 127 306 292 112 114 164 225
  53.8% 28.3% -9.4% -4.5% -61.7% 1.7% 43.6% 37.2%
New Home Sales (2) 347 300 769 481 374 322 325 425
  -22.2% -21.9% -26.7% -37.4% -22.3% -14.0% 1.0% 30.9%
Manufactured Home Shipments 44 47 96 82 50 50 50 63
  -15.4% -14.5% -19.3% -14.3% -39.0% 0.2% -0.5% 26.9%

(1) Monthly figures are seasonally adjusted at annual rates (SAAR figures).
(2) Based on a survey of homebuilders; excludes homes built under contract and multi-family rental units.
Manufactured home data is for July and August.
Forecasts and table: Reed Construction Data.


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