Residential Construction Spending Fell 0.3% in June

08/10/2011 by Jim Haughey

New residential construction spending fell 0.2 in June with a small gain in single family offset by a small drop in multifamily where developers are still delaying due to recent weak job gains. Residential remodeling construction spending fell 0.5% in June. Note that this sector is hard to measure; frequent large revisions occur. Recent revisions have put spending in this market back on track with the rest of the housing market so slim gains are likely for the rest of 2011.

New home permits and starts improved in June and sales were steady as 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. Also, the early August downgrade of the US credit rating appears likely to dampened consumer confidence for at least a few months and hence further slow the housing recovery.

The forecast is for residential construction spending to shrink 1.5% in 2011 and then rise at about a 20% annual pace in 2012-13.

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

  Monthly Figures (1)
(latest actual values)
Annual Figures
  Actual Forecast
  May-11 Jun-11 2007 2008 2009 2010 2011 2012 2013
Northeast starts (% change is period
versus same period, previous year)
71 77 143 120 61 72 72 103 127
-19.7% 28.3% -16.6% -16.3% -49.1% 17.4% 0.6% 42.9% 23.8%
Midwest 116 124 206 137 95 98 107 139 160
  -14.7% 45.9% -27.6% -33.7% -30.5% 3.2% 8.7% 29.8% 15.7%
South 289 292 676 451 281 296 305 393 478
  -8.7% 2.1% -25.9% -33.3% -37.7% 5.4% 3.0% 29.0% 21.4%
West 114 136 317 195 117 120 133 204 248
  13.2% 25.9% -28.5% -38.5% -40.0% 2.6% 10.7% 53.5% 21.2%
Total 580 629 1,342 909 554 585 617 839 1010
  -5.3% 16.7% -25.9% -32.3% -39.0% 5.6% 5.4% 36.1% 20.4%
Total Single-family 460 453 1,036 616 442 471 453 614 730
  -10.0% 0.4% -29.7% -40.5% -28.4% 6.7% -3.8% 35.4% 19.0%
Total Multi-family 120 176 306 292 112 114 163 225 280
  12.5% 100.0% -9.4% -4.5% -61.5% 1.3% 43.5% 37.8% 24.3%
New Home Sales (2) 281 312 769 481 374 321 322 415 493.75
  12.1% 1.6% -26.7% -37.4% -22.3% -14.1% 0.2% 28.8% 19.0%
Manufactured Home Shipments 46 48 96 82 50 50 50 63 75.75
  -16.4% -15.8% -19.3% -14.3% -39.0% 0.2% -0.5% 26.9% 19.8%

(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.
Forecasts and table: Reed Construction Data.