Single-Family and Multifamily Spending Up, Remodeling Declines Again

Total private residential construction spending decreased a negligible 0.1% on a month-over-month basis during April 2013, with the net decline driven by a further decrease in improvement spending. However, total housing-related spending is up 18.8% from April 2012 and has increased 35.7%  from the cycle low point in 2009.

Spending on new single-family housing has now increased for 22 of the last 23 months, increasing 1.4% over March. On a year-over-year basis new single-family expenditures have grown 38.6% and are up 81.9% from the cycle low pace set in mid-2009.

 

New multifamily construction spending registered a 3.4% gain in April and has increased 48.6% measured year-over-year.  Multifamily construction is up 123% from the cycle low recorded in mid-2010.

While single-family and multifamily construction continue to improve, home improvement spending has been and remains a source of weakness for the residential construction sector. Remodeling-related expenditures have declined significantly over the course of 2013. Improvement spending was down 3.3% in April and is down 7% from April 2012. Rising existing home sales point to increases later in the year.

Weak Remodeling Activity Weighs on Residential Construction Spending

Total private residential construction spending increased 0.4% on a month-to-month basis during March 2013. After data revisions, first quarter nominal spending levels came in 2.3% lower than the final three months of 2012. With that said, private construction spending has bounced back by 33% since its cyclical low from nearly two years ago and has advanced more than 18% compared to March 2012.

Spending on new single-family housing notched its 21st month-to-month gain over the last 22 months, increasing 1.6% versus February, which itself was revised higher from 4.6% to 5.4% growth. On a year-over-year basis the new single-family category has expanded 38% and has managed to rise 78% above the cyclical low observed back in mid-2009. With the current NAHB forecast projecting growth of 26% and 28% for single family housing starts in 2013 and 2014, respectively, we expect spending activity to continue rising over the next two years.

New multifamily construction spending registered a modest gain of 0.3% in March, but the initial estimate of a 2.2% drop for February was revised to a smaller decline of 1.4%. Despite these two lackluster months, the first-quarter average was a 12% improvement from the fourth quarter of 2012 and the nominal dollar value of spending has skyrocketed 111% in less than two years. The forecast calls for a modest decline in multifamily starts during the second quarter of 2013 after what was likely an unsustainably large increase during the first quarter (primarily in March). Multifamily starts are expected to increase in every quarter thereafter, albeit at a slower and steadier pace, which in turn will yield further growth in nominal spending levels.

While the other two categories improved, home improvement spending was a source of weakness for the residential construction sector. Remodeling expenditures have declined in each of the last five months, with the March 2013 estimate coming in at a drop of 1.4% compared to February. The 3-month moving average, which tends to smooth out the month-to-month volatility in reported home improvement spending, points to a noticeable dip in remodeling activity after a healthy surge between spring and fall of last year. The most recent forecast calls for remodeling activity to rise modestly over the remainder of the outlook period. However, this downward trend in spending data plus the latest edition of NAHB’s Remodeling Market Index point to some risk to projected home improvement activity over the near term.

Residential Construction Spending Bounces Back in February

After three consecutive months of slight declines, private residential construction spending increased 2.2% on a month-to-month basis in February. Despite the sluggish readings from the prior 3 months, nominal spending on residential construction activity remained more than 20% above its year-ago level and roughly 36% higher than the cyclical low in mid-2011.

The new single-family home category continued to show strength in February, gaining 4.3% versus January. Compared to February 2012, spending on new single-family homes has risen 34%, but perhaps more importantly, the level of nominal construction spending has surged more than 73% since bottoming out in mid-2009. Spending activity will likely expand further over the next two years as the current NAHB forecast calls for single-family housing starts to increase 23% and 29%, respectively, this year and next.

The multifamily sector took a step back in February, with spending on new multifamily projects slipping 2.2% from January. In fact, this marks the first outright month-to-month decline for this category since September 2011. Still, the overall trend remains decidedly positive for new multifamily construction activity as the level of spending is 52% ahead of the pace in February 2012 and has more than doubled the August 2010 low point. After a likely modest retrenchment in the first quarter of 2013, the baseline forecast calls for consistent gains in multifamily starts through the end of 2014.

Home improvement spending improved slightly in February, gaining 0.5% versus the previous month and is 1.1% above the level from last year. Although this construction spending category is the most volatile and likely to be revised, the 3-month moving average suggests spending on remodeling activity has cooled over the past several months. Nonetheless, with existing home sales expected to register steady growth going forward, home improvement activity should see a similar pattern as sellers spruce up their homes for sale and/or buyers decide to make changes after they move into the home.

Residential Construction Spending Flat in January

Private residential construction spending was relatively unchanged for the first month of 2013 due to declines in the volatile remodeling spending category. Nonetheless, total residential construction spending remains near post-2009 highs and has experienced growth in 15 of the last 17 months according to data from the Census Bureau.

Spending on new single-family homes continued to expand, rising 3.6% over December’s pace. On a year-over-year basis, the nominal value of spending on new single-family homes has risen over 30%. Since bottoming out around the midway point of 2009, construction spending has surged 65%. The current NAHB forecast calls for single-family housing starts to grow in 2013, with a slower pace of expansion anticipated during the first quarter of this year.

Construction spending on new multifamily projects also increased in January, growing 1.7% from December 2012. Gains in spending have occurred in each of the last 16 months. On a year-over-year basis, the level of apartment spending has increased almost 55% and has - as of January – more than doubled from the cyclical low set in August 2010.

Offsetting the gains in single-family and multifamily construction, January saw a 4% drop in improvement spending that resulted flat headline growth for total private residential category.  The 3-month moving average of remodeling spending was down almost 2% but remains near post-2007 highs.

Positive Run Continues for Residential Construction Spending

Private residential construction spending jumped 2.2% on a month-to-month basis during December 2012. The initial estimate of a 0.4% gain for November was moved up slightly to a 0.6% increase, but the October number was pushed appreciably higher from 1.3% to 3.2%. Spending has registered nine uninterrupted months of growth, as well as 16 of the last 17 months showing expansion. The nominal dollar level of spending has now reached its highest point since late 2008 and the average from the last three months is 32% above the cyclical low.

Spending on new single-family homes decelerated to its slowest pace of month-to-month growth since the first quarter of 2012, rising 0.8% versus November. On a year-over-year basis, the nominal value of spending on new homes has risen over 28%. In addition, since bottoming out around the midway point of 2009, construction spending has surged 59%. The current NAHB forecast calls for single-family housing starts to expand for the entirety of the outlook period, but a slower pace of growth is anticipated during the first quarter of this year. They are expected to re-accelerate over the remainder of 2013, and thus we anticipate a similar pattern will likely occur for construction spending.

 

Construction spending on new multifamily projects jumped 6.2% during December 2012. Moreover, the initial estimate for November was revised higher from 0.5% to 1.8%, indicating spending activity finished the year strong. Of the three main categories of residential construction, multifamily has experienced the strongest rebound from its cyclical trough. Gains in spending have occurred in each of the last 15 months, with the latest month available representing the second largest percentage increase over this time period. On a year-over-year basis, the level of spending has skyrocketed more than 57% and has gained 97% from the bottom in August 2010.

Remodeling activity improved in December as spending climbed 2.9% from the prior month. Preliminary estimates for October and November were also revised higher, significantly higher in the case of October with a 1.9% decline turning into a 2.3% gain. The 3-month moving average points to a solid upward trend in home improvement spending and closed out 2012 at its highest nominal dollar value since September 2007. NAHB’s Remodeling Market Index (RMI) has offered a similar judgment on recent home improvement activity as the current and future market indicators have achieved their best readings since the first quarter of 2004.

Residential Construction Spending Rises for Eighth Consecutive Month

Spending on private residential construction activity ticked 0.4% higher on a month-to-month basis during November 2012. October’s preliminary reading of a 3% gain was bumped down to a 1.3% increase, but at the same time the initial estimate for September was pushed upward from 1.1% to 2.9%. Spending has increased in each of the last 8 months (and 15 of the last 16), rising to a 4-year high and nearly 33% above the trough during the third quarter of 2010.

New single-family home construction led the way in terms of spending growth among the private residential categories during November, posting a 1.3% increase versus October. Spending has climbed more than 29% above its nominal level of a year ago and stands 57% higher compared to the trough in mid-2009. A softer reading on single-family housing starts might point to some potential weakness in spending on this category going forward, but a 2-point increase in NAHB’s HMI and another strong reading on permit authorizations point to stronger construction activity (and by extension spending) over the near term.

The multifamily construction sector registered its slowest rate of month-to-month growth in nearly a year, but November’s 0.5% still marked the 14^th month in a row spending activity has increased. In the past year, nominal spending on multifamily projects has jumped 46% and stands nearly 83% higher than the low posted in August 2010. Starts of multifamily dwellings have averaged over 250,000 units for the past six months and approached 300,000 during the past two months. The current forecast calls for a modest slowdown in starts during the first quarter that will likely be followed by gains through the end of 2014–a pattern that can be expected for construction spending in this sector.

Spending on home improvements dipped 0.7% in November, adding to the 1.9% contraction (revised downward from a 1.8% gain) reported for October. Expressed as a 3-month average (so as to smooth out monthly volatility), nominal spending on remodeling activity has hovered around a 5-year high for the past few months. NAHB’s Remodeling Market Index (RMI) has pointed to an even stronger assessment of current market conditions by professional remodelers as the RMI reached 50 for the first time since 2005. Our forecast calls for steady gains in remodeling activity through the end of 2014.

Residential Construction Spending Climbs to 4-year High

Private residential construction spending surged 3% on a month-to-month basis in October 2012. The initial estimate for September was revised downward from a 2.8% gain down to a 1.1% rate of growth; however, this was more than offset by an upward bump in the previously reported estimate for August from 1.2% to 2.8%. Following increases in 14 of the last 15 months, nominal spending on private residential construction activity is at its highest dollar value since late 2008. In addition, spending has risen 32% above the trough registered during the third quarter of 2010.

New single-family homes continued to post solid rates of growth, increasing 3.6% on a month-to-month basis for the second month in a row. Spending is also 29% above its year-ago level and has climbed 55% since bottoming out in mid-2009. This latest print on construction spending merely confirms the firming recovery for new single-family home construction that has been observed via housing starts and the HMI. With permit authorizations climbing rapidly and hitting their highest levels since the summer months of 2008, we anticipate this robust pace of growth in construction activity to continue over the near term.

The positive momentum continued for the multifamily sector, notching its 13th consecutive monthly increase with a 6.2% gain over September 2012. Overall, the dollar value of multifamily construction activity has surged more than 82% from its cyclical low observed just two years ago, due in part to strong growth in renter demand. Multifamily starts have averaged better than 230,000 units over the duration of 2012 and given that permits have averaged approximately 280,000 units during the same time period, multifamily construction spending will likely rise further in the coming months.

Home improvement activity expanded 1.8% during October 2012, offsetting the downward revision of a 1.2% decline posted for September. Using the 3-month moving average to iron out some of the volatility in this metric, nominal remodeling spending has reached its highest point in five years. NAHB’s own Remodeling Market Index (RMI) has pointed to an even stronger assessment of current market conditions by professional remodelers as the RMI reached 50 for the first time since 2005.

Residential Construction Spending Surges on New Construction and Remodeling

Private residential construction spending jumped 2.8% on a month-to-month basis during September 2012. The preliminary estimates for July and August were revised higher as well, from previous prints of -0.1% and 0.9% to 1.3% and 1.2%, respectively. Nominal spending activity on private residential construction has expanded in 13 of the last 14 months, putting it nearly 21% above September 2011 and at its highest dollar value since the end of 2008.

The new single-family homes spending category saw growth accelerate in September, gaining 3.9% from the previous month and 26% from last year. Save for a one month downward blip in March 2012, construction spending on new single-family housing has increased solidly since last summer and risen more than 50% since hitting rock bottom during the second quarter of 2009. Data sources such as housing starts and NAHB’s own HMI continue to offer evidence that construction of new single-family homes is on the mend and given that building permits are at their highest level since mid-2008, construction activity is expected to rise for the foreseeable future.

Multifamily construction spending registered its 12^th consecutive month-to-month increase, gaining 1.3% over August 2012. Although the multifamily sector has posted the largest percentage increase in spending activity compared to its cyclical low (73%), the overall trend in spending growth has slowed in each of the last three months. While this might represent a lull, spending should continue to expand over the near term as multifamily starts have exceeded 200,000 units in 8 of the last 9 months and permits for 5+ units surged to a four-year high in September.

Nominal spending on home improvement activity increased 2%, more than recouping the 1.1% month-to-month drop that was reported in August. While remodeling has bounced around for much of the past two years, the level of spending activity has trended appreciably higher over the past few months and is now sitting at a 4-year high. Indeed, NAHB’s Remodeling Market Index (RMI) indicated professional remodelers’ perceptions of current market conditions are at their highest levels since 2005.

Residential Construction Spending Rebounds in August

Private residential construction spending increased 0.9% on a month-to-month basis during August 2012. In addition, estimates for both June and July were revised upward strongly from initial readings of 2.4% and -1.6% to 3.3% and -0.1%, respectively. The nominal level of private residential construction spending has improved significantly over the past year, rising nearly 18% since last August and reaching its highest mark since early 2009.

Spending on new single-family homes jumped 2.8% and has registered sequential gains in 14 of the last 15 months, which leaves the level of spending almost 21 percent ahead of its year-ago level. Compared to the cyclical low observed in the second quarter of 2009, spending activity has rebounded approximately 44 percent.

The improvement in spending has been expected given the solid increases observed in starts and NAHB’s own HMI. Going forward, with single-family building permits averaging more than 500,000 (annualized) during the last four months, additional growth in new home construction is likely. In fact, the forecast calls for starts of new single-family homes to increase at a solid clip through the end of 2013, which should ultimately translate into sustained upward momentum in spending.

The multifamily side of the market has staged the strongest rebound over the past year, and that trend continued into August as nominal spending climbed 3.7% from July. After bottoming out two years ago, nominal spending on new multifamily housing has surged more than 76%. The rate of growth in new multifamily construction is expected to trail what was observed in late-2011 and early 2012, but with 5+ permits having averaged nearly 250,000 units since the beginning of the year, construction (and spending) activity will remain at a high level going forward.

Home improvement spending declined for the second consecutive month, falling 2.2% versus July. Nominal spending on home improvements has trended slightly higher over the last 12 months, but the overall pattern from the past two+ years has been for remodeling activity to bounce around a relatively close range. Still, this steady pace of activity provided some measure of optimism as the single- and multifamily segments of the construction sector emerged from sustained periods of weakness.

Residential Construction Spending Rises in June

According to the Census Bureau, private residential construction spending increased for the third consecutive month in June, gaining 1.3 percent from an upwardly revised estimate for May 2012. The overall trend in private residential construction spending has been quite strong as the data expressed on a three-month moving average basis has risen in each of the last 9 months. With this month’s reading, nominal spending on private residential construction projects has reached its highest point since the beginning of 2009.

Construction spending on new single-family homes jumped 3 percent on a month-to-month basis and has staged nearly a 19 percent improvement from the same period a year ago. Moreover, since bottoming out during the second quarter of 2009, the nominal dollar value of spending on new single-family homes has climbed 38 percent. With both starts and permitting activity for new single-family homes still on the rise, additional gains in spending are expected over the very near term and should carry forward as the forecast calls for the pace of homebuilding activity to gain momentum as the calendar transitions to 2013.

Multifamily construction spending increased 3.4 percent during June and has experienced gains in each of the last 9 months. Overall, spending on new multifamily units has skyrocketed by 66 percent from its low point in August 2010. Construction activity is expected to level out over the remainder of 2012, but we anticipate multifamily starts to remain well above 200,000 through the end of next year. Home improvement spending slipped on a month-to-month basis in June, continuing its see-saw pattern of the last several months. Remodeling activity has remained in a relatively tight range for the past two years, but did provide some degree of stability during the housing market downturn while production of multifamily and single-family units fell rapidly.