Housing is now a bright spot on the economic landscape. For the fifth consecutive month, new residential construction spending increased, leaping 2.9% on a seasonally adjusted (SA) basis in August after moving up 1.6% in July. Not seasonally adjusted (NSA) year-to-date spending was 14.8% higher than a year ago. Single-family construction spending shot up 2.8% in August after rising 1.6% in July. Multifamily construction spending catapulted an even stronger 3.2% higher after gaining 1.8% in July. Year-to-date, single-family construction spending was 14.5% higher than 2011, while multifamily spending was up 16.6%.
Residential Construction Spending Data | ||||||||
| Monthly Figures (1) (latest actual values) |
3-Month Moving Average | Year-to-Date (NSA) | ||||||
| Jun-12 | Jul-12 | Aug-12 | Jun-12 | Jul-12 | Aug-12 | Jan-11 to Aug-11 |
Jan-12 to Aug-12 |
|
| New Single-family | 125.6 | 127.6 | 131.2 | 122.3 | 125.0 | 128.1 | 70.0 | 80.1 |
| Month-over-Month % Change | 3.1% | 1.6% | 2.8% | 2.2% | 2.2% | 2.5% | ||
| (Year-over-year % change of NSA data) | 18.0% | 18.9% | 20.8% | -7.6% | 14.5% | |||
| New Multifamily (2) | 27.4 | 27.9 | 28.8 | 26.4 | 27.2 | 28.1 | 14.9 | 17.4 |
| 4.3% | 1.8% | 3.2% | 4.5% | 3.1% | 3.1% | |||
| 19.3% | 24.9% | 21.7% | -6.6% | 16.6% | ||||
| New Residential (3) | 153.0 | 155.5 | 160.0 | 148.7 | 152.2 | 156.2 | 84.9 | 97.5 |
| 3.3% | 1.6% | 2.9% | ||||||
| 18.2% | 19.9% | 21.0% | -7.4% | 14.8% | ||||
| Residential Improvements (4) | 124.7 | 121.9 | 119.9 | 120.4 | 122.5 | 122.2 | 74.6 | 78.8 |
| 3.2% | -2.2% | -1.7% | 2.9% | 1.8% | -0.3% | |||
| 7.9% | 22.1% | 9.3% | 0.7% | 5.5% | ||||
| Total Residential (5) | 277.7 | 277.4 | 279.9 | 269.1 | 274.7 | 278.3 | 159.6 | 176.3 |
| 3.3% | -0.1% | 0.9% | 2.7% | 2.1% | 1.3% | |||
| 13.2% | 20.8% | 15.5% | -3.8% | 10.5% | ||||
(1) Monthly levels are seasonally adjusted at annual rates (SAAR figures). | ||||||||
Single-Family Housing
September single-family housing starts jumped 11.0% to 603,000 at a seasonally adjusted annual rate (SAAR), the highest they have been since August 2008, according to the Census Bureau. This follows a strong 7.3% increase in August to 543,000.
Single-family building permits were up as well, increasing 6.7% to 545,000, their highest level since July 2008, from August’s 511,000. Builders remain optimistic as shown by the October NAHB/Wells Fargo Housing Market Index (HMI), which edged up 1 point to 41 after rising 3 points the month before. The October HMI is at its highest level since June 2006. The direction of changes in the HMI has proved to be a strong indicator of the direction of future changes in housing starts by one to two months.
Multifamily Housing
September multifamily starts skyrocketed 25.1% to 269,000 (SAAR), after falling 3.2% in August. Given the monthly variability of multifamily starts, the three-month moving average provides a better picture of the state of multifamily activity. September’s three-month moving average of 235,000 was up 7.0% from August and its second highest level since November 2008. The average has exceeded 200,000 starts for eleven months in a row and September’s three-month moving average of multifamily building permits at 313,000 was at its highest level since August 2008.
Residential Construction Data | ||||||||||
| Monthly Figures (1) (latest actual values) |
3-Month Moving Average | Year-to-Date (NSA) | Year-to-Date (NSA) | |||||||
| Jul-12 | Aug-12 | Sep-12 | Jul-12 | Aug-12 | Sep-12 | Jan-11 to Aug-11 |
Jan-12 to Aug-12 |
Jan-11 to Sep-11 |
Jan-12 to Sep-12 |
|
| Northeast Starts | 86 | 79 | 75 | 80 | 81 | 80 | 45 | 53 | 50 | 60 |
| Month-over-Month % Change | 10.3% | -8.1% | -5.1% | 2.6% | 1.3% | -1.2% | ||||
| Year-over-year % Change of NSA data | 1.3% | 42.3% | 28.8% | -7.1% | 18.5% | -7.9% | 19.6% | |||
| Midwest Starts | 111 | 134 | 143 | 106 | 114 | 129 | 65 | 77 | 74 | 90 |
| 13.3% | 20.7% | 6.7% | -4.2% | 8.2% | 13.1% | |||||
| 24.2% | 55.8% | 38.9% | -4.9% | 18.6% | -3.4% | 21.2% | ||||
| South Starts | 348 | 376 | 451 | 360 | 363 | 392 | 205 | 259 | 234 | 300 |
| -4.9% | 8.0% | 19.9% | -4.2% | 1.0% | 7.8% | |||||
| 15.5% | 22.4% | 38.8% | -3.6% | 26.5% | -1.9% | 28.0% | ||||
| West Starts | 183 | 169 | 203 | 184 | 188 | 185 | 87 | 114 | 101 | 133 |
| -13.7% | -7.7% | 20.1% | 7.0% | 2.2% | -1.6% | |||||
| 39.4% | 19.4% | 24.7% | 2.0% | 31.8% | 4.8% | 30.8% | ||||
| Total Starts (2) | 728 | 758 | 872 | 729 | 747 | 786 | 401 | 504 | 460 | 583 |
| -3.4% | 4.1% | 15.0% | -0.9% | 2.4% | 5.3% | |||||
| 20.1% | 28.6% | 34.4% | -3.1% | 25.5% | -1.5% | 26.7% | ||||
| Single-family Starts | 506 | 543 | 603 | 517 | 527 | 551 | 293 | 356 | 331 | 408 |
| -4.7% | 7.3% | 11.0% | 0.1% | 1.9% | 4.6% | |||||
| 20.5% | 26.6% | 40.8% | -12.8% | 21.3% | -12.0% | 23.5% | ||||
| Multifamily | 222 | 215 | 269 | 213 | 220 | 235 | 108 | 148 | 129 | 174 |
| -0.4% | -3.2% | 25.1% | -3.2% | 3.4% | 7.0% | |||||
| 19.3% | 33.8% | 23.3% | 38.6% | 36.9% | 41.2% | 34.6% | ||||
| New Home Sales (3) | 373 | 368 | 389 | 367 | 367 | 377 | 209 | 255 | 233 | 286 |
| 3.6% | -1.3% | 5.7% | 1.4% | -0.1% | 2.6% | |||||
| 25.9% | 24.0% | 29.2% | -9.5% | 22.0% | -9.0% | 22.7% | ||||
| Manufactured Home Shipments | 51 | 57 | NA | 53 | 53 | NA | 32 | 38 | 37 | NA |
| -0.1% | 12.9% | -2.1% | 1.0% | |||||||
| 14.8% | 7.6% | -10.0% | 17.2% | -7.3% | ||||||
Housing starts, home sales, and manufactured home shipments are all in thousands. | ||||||||||
Outlook for Residential Construction
September’s housing numbers may be one of those blips upward that is the result of the normal statistical variation of the measure and also occurs in other economic numbers such as the employment statistics. Nonetheless, the clear trend for about a year has been an improving housing market. The outlook for housing remains positive due to a number of factors
The Reed Economics multifamily construction forecast is based on our expectation that interest rates will remain low, that vacancy rates will continue to fall (or at least not rise significantly), and that rents will rise further. The Reed single-family housing forecast is similarly positive based on improving economic growth and employment, the already noted historically low mortgage rates, and the Federal Reserve’s announced support for the mortgage market. However, it must be noted that single-family housing construction is advancing from an extremely low level of activity, which produces relatively large percentage increases.
Reed’s forecast is for new residential construction spending to move 17.1% higher in 2012, 17.3% higher in 2013, and 15.2% higher in 2014. Even with these strong increases, by the end of 2014 residential construction activity will remain below the most conservative estimates of the amount of home building necessary to meet the country’s long-term housing needs.
Residential Construction Data |
||||||
| Actual | Forecast | |||||
| 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | |
| Northeast Starts | 62 | 72 | 68 | 79 | 95 | 111 |
| (Year-over-year % change of NSA data) | -48.9% | 15.9% | -5.4% | 17.3% | 19.0% | 17.5% |
| Midwest Starts | 97 | 98 | 101 | 120 | 145 | 156 |
| -28.0% | 0.8% | 3.1% | 19.3% | 20.4% | 7.8% | |
| South Starts | 278 | 298 | 308 | 388 | 421 | 476 |
| -38.6% | 6.9% | 3.5% | 26.1% | 8.3% | 13.3% | |
| West Starts | 117 | 120 | 133 | 174 | 233 | 298 |
| -40.5% | 2.7% | 10.5% | 31.1% | 34.0% | 28.0% | |
| Total Starts (1) | 554 | 587 | 609 | 762 | 893 | 1042 |
| -38.8% | 5.9% | 3.7% | 25.1% | 17.2% | 16.7% | |
| Single-family Starts | 445 | 471 | 431 | 532 | 624 | 722 |
| -61.6% | 6.2% | 54.0% | 29.3% | 16.9% | 18.6% | |
| Multifamily Starts | 109 | 116 | 178 | 230 | 269 | 319 |
| -28.4% | 5.9% | -8.6% | 23.4% | 17.3% | 15.8% | |
| New Home Sales (2) | 375 | 323 | 306 | 366 | 420 | 513 |
| -22.7% | -13.9% | -5.3% | 19.7% | 14.7% | 22.0% | |
| Manufactured Home Shipments | 50 | 50 | 52 | 57 | 64 | 72 |
| -39.2% | 0.5% | 3.1% | 9.7% | 12.5% | 12.9% | |
| Residential Construction Spending (Billions of Current Dollars) | ||||||
| New Single-family | 105.3 | 112.6 | 108.2 | 125.8 | 146.1 | 168.6 |
| -43.3% | 6.9% | -3.9% | 16.3% | 16.1% | 15.4% | |
| New Multifamily (3) | 35.9 | 24.1 | 22.6 | 27.4 | 33.7 | 38.5 |
| -30.0% | -32.9% | -6.0% | 20.9% | 23.2% | 14.1% | |
| New Residential (4) | 141.2 | 136.7 | 130.8 | 153.2 | 179.8 | 207.0 |
| -40.4% | -3.2% | -4.3% | 17.1% | 17.3% | 15.2% | |
| Residential Improvements (5) | 112.7 | 112.5 | 114.9 | 119.8 | 124.9 | 133.6 |
| -6.6% | -0.2% | 2.2% | 4.3% | 4.3% | 7.0% | |
| Total Residential (6) | 253.9 | 249.1 | 245.7 | 273.0 | 304.7 | 340.7 |
| -29.0% | -1.9% | -1.4% | 11.1% | 11.6% | 11.8% | |
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 Slips Further in August
Nonresidential Building Construction Hits an Air Pocket in August
Heavy Engineering Construction Spending Tumbles for the Third Month in a Row
