Construction Forecasts

News & Analysis

Residential Construction Spending Fell 2.1% in May

07/11/2011 by Jim Haughey, RCD Chief Economist

New residential construction spending fell 0.6% in May led by a 2.3% fall in the multi family market where developers reacted quickly to a sharp drop in monthly job gains. Spending for residential remodeling declined 3.8% more than reversing a brief uptick in April. Permits and starts improved in May and the pace of economic growth returned from near zero to subpar growth late in June. New residential construction spending is expected to rise slowly from about midyear. Single family homebuilders have record low inventories and are ready to boost starts quickly when spending and confidence rebound.

The restraints on housing are gradually lessening although there is still a risk that a flood of homes offered at deeply discounted prices could emerge at any time from the tangled legal foreclosure process and temporarily further depress single family and condo home construction.

The forecast is for residential construction spending to shrink 1.9% in 2011 and then rise 22.9% in 2012.

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

  Monthly Figures (1)
(latest actual values)
Annual Figures
  Actual Forecast
  Apr-11 May-11 2007 2008 2009 2010 2011 2012
Northeast starts (% change is period
versus same period, previous year)
85 0 143 120 61 72 73 103
-29.4% -100.0% -16.6% -16.3% -49.1% 17.4% 2.0% 40.9%
Midwest 119 94 206 137 95 98 96 133
  -17.6% -19.0% -27.6% -33.7% -30.5% 3.2% -2.1% 37.9%
South 374 271 676 451 281 296 304 393
  -28.6% -6.2% -25.9% -33.3% -37.7% 5.4% 2.8% 29.3%
West 109 137 317 195 117 120 133 204
  6.4% 20.2% -28.5% -38.5% -40.0% 2.6% 10.3% 54.1%
Total 687 560 1,342 909 554 585 606 833
  -21.3% -3.4% -25.9% -32.3% -39.0% 5.6% 3.5% 37.5%
Total Single-family 566 419 1,036 616 442 471 444 609
  -28.6% -8.9% -29.7% -40.5% -28.4% 6.7% -5.8% 37.3%
Total Multi-family 121 141 306 292 112 114 162 224
  13.2% 17.5% -9.4% -4.5% -61.5% 1.3% 42.2% 38.1%
New Home Sales (2) 420 319 769 481 374 321 328 425
  -22.4% 13.5% -26.7% -37.4% -22.3% -14.1% 2.1% 29.6%
Manufactured Home Shipments 47 46 96 82 50 50 50 63
  -14.5% -16.4% -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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