Construction Forecasts

News & Analysis

Residential Construction Spending Increased 1.3% in April

06/07/2011 by Jim Haughey, RCD Chief Economist

New residential construction spending fell 0.7% in April as housing permits and starts dropped but new home sales rose. This is a mixed signal for the market outlook. The sustained pickup previously expected in the spring is delayed to the summer as a consequence of the recent rise in inflation and slowdown in job growth which combined to depress consumer confidence significantly. Single family homebuilders have record low inventories and are ready to boost starts quickly when confidence rebounds.

Construction spending for residential remodeling increased 7.5% in April the 6% rise previously reported in March has been revised to a slight decline.. While the April 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. However, these positive market drivers are now being more than offset, at least temporarily, by the recent sharp fall in consumer confidence and the slippage of real income growth to barely more than 0.0%.

The forecast is for residential construction spending to shrink 0.4% in 2011 and then rise 25.5% in 2012.

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

  Monthly Figures (1)
(latest actual values)
Annual Figures
  Actual Forecast
  Mar-11 Apr-11 2007 2008 2009 2010 2011 2012
Northeast starts (% change is period
versus same period, previous year)
65 60 143 120 61 72 73 103
-3.1% -29.4% -16.6% -16.3% -49.1% 17.4% 2.0% 40.9%
Midwest 93 96 206 137 95 98 95 135
  -10.8% -19.3% -27.6% -33.7% -30.5% 3.2% -3.5% 42.5%
South 334 255 676 451 281 296 319 411
  -0.9% -31.8% -25.9% -33.3% -37.7% 5.4% 7.9% 28.7%
West 134 112 317 195 117 120 124 185
  -19.4% 2.8% -28.5% -38.5% -40.0% 2.6% 2.8% 49.5%
Total 626 523 1,342 909 554 585 610 833
  -6.5% -23.9% -25.9% -32.3% -39.0% 5.6% 4.4% 36.5%
Total Single-family 531 394 1,036 616 442 471 443 609
  -21.8% -30.4% -29.7% -40.5% -28.4% 6.7% -5.9% 37.4%
Total Multi-family 95 129 306 292 112 114 167 224
  78.9% 6.6% -9.4% -4.5% -61.5% 1.3% 46.7% 34.2%
New Home Sales (2) 385 323 769 481 374 321 327 425
  -21.8% -23.1% -26.7% -37.4% -22.3% -14.1% 1.9% 29.8%
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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