A sluggish economy, a soft jobs market, a large inventory of foreclosed homes, the threat of additional foreclosures, and difficulty in obtaining financing for both potential homebuyers and for builders continue to act as a drag on the housing market. In spite of these factors, some glimmers of hope have appeared recently. Although total housing starts fell 0.3% in October after rising 7.7% in September, the decline was due to the ever volatile multifamily starts, which masked developments for single-family starts. October single-family starts rose to 430,000 units at a seasonally-adjusted annual rate from September’s 414,000 starts. This left the three-month moving average at 423,000, roughly a level it has been at for about a year.
However, building permits suggest that the 430,000 starts may be more than a bounce back from the September number as single-family permits jumped 5.1% in October to 434,000. Further, single-family permits have been trending up for the past eight months. Meanwhile, the National Association of Home Builders (NAHB) November Housing Market Index (HMI) rose from 17 to 20 — the second month in a row that the index increased three points and the highest it has been since a reading of 22 in May of last year as well as the second highest reading in three and half years.
The outlook is for slow, but steady improvement in residential construction. Low long-term interest rates, some loosening of overly tight lending standards, and an improving jobs market will provide positive pressure to the housing market. Lean builder inventories mean that any increase in single-family housing demand will translate quickly into additional construction activity. Meanwhile, the outlook for multifamily housing projects remains bright in the near term.
New residential construction spending has been inching upward for the past four months. In September it rose 0.2% to $129.4 billion, its highest level since January, after increasing 1.4% in August. The forecast is for residential construction spending to fall 5.6% in 2011 and then rise 2.9% in 2012 and 7.3% in 2013.
Residential Construction Data |
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| Monthly Figures (1) (latest actual values) |
3-Month Moving Average |
Actual | Forecast | |||||||||
| Aug-11 | Sep-11 | Oct-11 | Aug-11 | Sep-11 | Oct-11 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | |
| Northeast Starts | 57 | 58 | 68 | 70 | 67 | 61 | 121 | 62 | 72 | 67 | 71 | 83 |
| Month-over-Month % Change | -32.9% | 1.8% | 17.2% | 0.5% | -4.8% | -8.5% | ||||||
| (Year-over-year % change of NSA data) | -24.6% | -14.8% | -14.7% | -15.3% | -48.9% | 15.9% | -7.1% | 7.1% | 15.8% | |||
| Midwest Starts | 86 | 93 | 102 | 101 | 90 | 94 | 135 | 97 | 98 | 95 | 99 | 111 |
| -4.4% | 8.1% | 9.7% | -4.1% | -10.9% | 4.5% | |||||||
| -21.8% | 2.3% | 8.0% | -35.8% | -28.0% | 0.8% | -3.5% | 4.8% | 11.6% | ||||
| South Starts | 301 | 321 | 326 | 298 | 309 | 316 | 453 | 278 | 298 | 306 | 332 | 366 |
| -1.6% | 6.6% | 1.6% | 4.3% | 3.7% | 2.2% | |||||||
| 7.5% | 9.8% | 26.9% | -33.4% | -38.6% | 6.9% | 2.7% | 8.5% | 10.3% | ||||
| West Starts | 141 | 158 | 132 | 136 | 144 | 144 | 196 | 117 | 120 | 130 | 144 | 185 |
| 5.2% | 12.1% | -16.5% | 1.7% | 6.1% | -0.5% | |||||||
| 2.3% | 23.1% | 40.3% | -38.9% | -40.5% | 2.7% | 8.1% | 10.9% | 28.5% | ||||
| Total Starts (2) | 585 | 630 | 628 | 605 | 610 | 614 | 906 | 554 | 587 | 596 | 646 | 743 |
| -4.9% | 7.7% | -0.3% | 1.8% | 0.8% | 0.7% | |||||||
| -3.2% | 8.7% | 18.9% | -33.2% | -38.8% | 5.9% | 1.6% | 8.3% | 15.1% | ||||
| Total Single-family Starts | 425 | 414 | 430 | 435 | 423 | 423 | 622 | 445 | 471 | 422 | 434 | 476 |
| -1.2% | -2.6% | 3.9% | 0.7% | -2.7% | 0.0% | |||||||
| 0.8% | -6.1% | -0.3% | -40.5% | -28.4% | 5.9% | -10.4% | 2.9% | 9.6% | ||||
| Total Multifamily Starts | 160 | 216 | 198 | 170 | 187 | 191 | 284 | 109 | 116 | 174 | 211 | 268 |
| -13.5% | 35.0% | -8.3% | 4.7% | 9.8% | 2.3% | |||||||
| -12.2% | 50.7% | 92.6% | -8.3% | -61.6% | 6.2% | 50.4% | 21.4% | 26.6% | ||||
| New Home Sales (3) | 293 | 303 | 307 | 297 | 297 | 301 | 485 | 375 | 323 | 303 | 321 | 353 |
| -0.7% | 3.4% | 1.3% | -1.7% | 0.0% | 1.3% | |||||||
| 8.7% | 0.0% | 8.7% | -37.5% | -22.7% | -13.9% | -6.1% | 6.0% | 9.7% | ||||
| Manufactured Home Shipments | 54 | 55 | NA | 50 | 51 | NA | 82 | 50 | 50 | 49 | 58 | 69 |
| 21.7% | 1.9% | 3.6% | 1.1% | |||||||||
| 5.9% | 14.2% | -14.5% | -39.3% | 0.7% | -1.5% | 17.6% | 18.5% | |||||
| Residential Construction Spending (Billions Current $) | ||||||||||||
| New Residential | 129.2 | 129.4 | NA | 129.2 | 129.4 | NA | 237.0 | 141.2 | 136.2 | 128.6 | 132.4 | 142.1 |
| 1.4% | 0.2% | 0.7% | 0.7% | |||||||||
| -2.3% | -7.8% | -33.1% | -40.4% | -3.5% | -5.6% | 2.9% | 7.3% | |||||
| Residential Improvements* | 105.5 | 106.9 | NA | 105 | 107 | NA | 120.7 | 112.7 | 112.5 | 112.8 | 110.3 | 115.2 |
| 0.1% | 1.3% | -7.0% | -5.5% | |||||||||
| -4.3% | -1.6% | -13.5% | -6.6% | -0.2% | 0.3% | -2.2% | 4.5% | |||||
Housing starts, home sales, and manufactured home shipments are all in thousands. |
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Read more forecasts from Reed Construction Data:
Construction Spending Inches Forward in September
Nonresidential Building Construction Spending Slips in September
Heavy Engineering (Non-Building) Construction Flat in September
