U.S. private residential construction spending declined 0.6% in February, as spending on single-family construction decreased 1.8%. Spending declined for the ninth month in a row amid elevated mortgage interest rates. Consequently, private residential construction is 5.7% lower compared to a year ago, according to the National Association of Home Builders (NAHB).
The monthly decline is largely attributed to lower spending on single-family construction, which has been declining since June 2022. Compared to a year ago, spending on single-family construction was 21.4% lower. This is consistent with a pull back for single-family home building, as surging interest rates cooled the housing market during 2022.
Multifamily construction spending increased by 1.4% in February, after an increase of 0.2% in January. This was 22.2% over the February 2022 estimates, largely due to the strong demand for rental apartments. Private residential improvement spending stayed flat in February and was 8.0% higher compared to a year ago. The remodeling market continues to overperform the rest of the residential construction sector.
Keep in mind that construction spending reports the value of property put-in-place.
The NAHB construction spending index, which is shown in the graph below (the base is January 2000), illustrates how construction spending on single-family has slowed since early 2022 under the pressure of supply-chain issues and elevated interest rates. Multifamily construction spending has had solid growth in recent months, while improvement spending has increased its pace since early 2019. Before the COVID-19 crisis hit the U.S. economy, single-family and multifamily construction spending experienced solid growth from the second half of 2019 to February 2020, followed by a quick post-covid rebound since July 2020.
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Spending on private nonresidential construction increased by 0.7% in February to a seasonally adjusted annual rate of $601 billion. The monthly private nonresidential spending increase was mainly due to more spending on the class of manufacturing category ($3.7 billion), followed by the power category ($1.5 billion).
Image: NAHB
