July Gains in Residential Construction Spending

NAHB analysis of Census Construction Spending data shows that private residential construction spending rose 1.4% in July after an increase of 1.5% in June and 3.5% in May. Spending stood at a seasonally adjusted annual pace of $879 billion. However, total private residential construction spending is still 5.5% lower compared to a year ago.

The total construction monthly increase is attributed to more spending on all three categories: single-family, multifamily construction, and improvements. Spending on single-family construction rose 2.8% in July after an increase of 1.9% in June. Compared to a year ago, spending on single-family construction was 15.2% lower. Multifamily construction spending inched up 0.2% in July, and was 24.6% over the July 2022 estimates, largely due to the strong demand for rental apartments. Private residential improvement spending edged up 0.3% in July and was 2% lower compared to a year ago.

Keep in mind that construction spending reports the value of property put-in-place. Per the Census definition: The “value of construction put in place” is a measure of the value of construction installed or erected at the site during a given period. The total value-in-place for a given period is the sum of the value of work done on all projects underway during this period, regardless of when work on each individual project was started or when payment was made to the contractors. For some categories, published estimates represent payments made during a period rather than the value of work done during that period.

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 slowed since mid-2022. 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.

Spending on private nonresidential construction was up 19.8% over a year ago. The annual private nonresidential spending increase was mainly due to higher spending on the class of manufacturing category ($83.7 billion), followed by the office category ($7.1 billion).–BY NA ZHAO