August Brings Good News on Private Residential Spending

NAHB analysis of Census Construction Spending data shows that total private residential construction spending rose 0.4% in August to a seasonally adjusted annual rate of $786.6 billion. Total private residential construction spending was 24.3% higher than a year ago.

The monthly gains are attributed to the strong growth of spending on improvements, while spending on single-family and multifamily constructions slipped. Spending on improvements rose 2.5% in August, after a 0.2% dip in July. Single-family construction spending decreased to a $413.4 billion annual pace in August, down by 0.7% over the downward revised July estimates. Multifamily construction spending dipped 0.8% in August. Homebuilding is still facing the supply chain issues, the rising material costs and labor shortages.

The NAHB construction spending index, which is shown in the graph below (the base is January 2000), illustrates the solid growth in single-family construction and home improvement from the second half of 2019 to February 2020, before the COVID-19 hit the U.S. economy, and the quick rebounds since July 2020. New multifamily construction spending has picked up the pace after a slowdown in the second half of 2019.

Private nonresidential construction spending slipped to a seasonally adjusted annual rate of $455.6 billion in August, a 1% decline from upwardly revised July estimates. And it was 2.3% lower than a year ago. The largest contribution to this month-over-month nonresidential spending decrease was made by the class of power ($1.4 billion), followed by manufacturing ($1.3 billion), and class of commercial ($0.7 billion).