Residential construction spending rises

Total private residential construction spending increased by 3.1% in December 2020, the National Association of Home Builders (NAHB) reported.

Citing the latest Census Construction Spending data, the NAHB said that residential construction spending rose to a seasonally adjusted annual rate of $691.0 billion in December and total private residential construction spending was 20.7% higher than a year ago.

The monthly gains are largely attributed to the strong growth of spending on single-family and improvements, the NAHB said.

Single-family construction spending rose to a $365 billion annual pace in December, up by 5.8%. Spending is also up 20.7% from December 2020, which is in line with solid single-family housing starts.

Remodeling spending, including spending on remodeling, major replacements, and additions to owner-occupied housing units, inched up by 0.4% in December. 

Multifamily construction spending inched up 0.1%, reaching a new record high. It was 17.8% higher since a year ago.

Conversely, non-residential construction spending declined 0.8% in December 2020, according to Associated Builders and Contractors (ABC). On a seasonally adjusted annualized basis, nonresidential spending totaled $790.2 billion for the month, 4.8% lower than in December 2019 but 3.8% higher than in December 2018.

Spending fell on a monthly basis in 9 of the 16 nonresidential subcategories. Private nonresidential spending was down 1.7%, while public nonresidential construction spending was up 0.5% in December.

“The slump in nonresidential construction spending has now persisted for several months,” said ABC Chief Economist Anirban Basu. “Leading indicators are not promising, including ABC’s Construction Backlog Indicator, which remains 1.5 months lower than in December 2019. The pandemic has ravaged commercial real estate fundamentals, and this sector will likely remain weak for years to come due to behavioral shifts caused by the COVID-19 pandemic. That weakness will limit the initial pace of private construction spending recovery in a number of key segments, even as the pandemic fades in the rearview mirror.

The Census Construction Spending report for December 2020 is available here.