June 1, 2023

Construction spending (the green bars above) rose 1.2% in April after climbing 0.3% in March and jumping 2.4% in March.   In the past 12 months it has risen 7.2%.  As indicated  below, spending on the construction of single-family housing has declined sharply, but builders have ramped up the production of rental housing as well as many categories of both non-residential and government spending.

Private construction spending (excluding the government sector) rose 1.3% in April after gaining 0.4% in March and 2.4% in February.  In the past year private construction has risen 4.9%.

Within the private construction spending category, residential spending rose 0.5% in April after having been unchanged in both February and March.  After rising steadily for two years, residential spending began to decline in June of last year and fell every month from then until January of this year  In the past 12 months residential construction spending has fallen 9.2%. But what is important is that the monthly declines have finally flattened out and should soon be replaced by some growth in this particular series.  Home sales fell sharply because mortgage rates rose rapidly to the 7.0% mark and prices were rising rapidly.   That caused builders to slow the pace of single-family construction because they feared that by the time the house was completed the economy may be in recession.  In the past year construction of single-family homes has fallen 24.7%.  Multi-family construction, however, has risen 24.9%.  There is a definite shortage of rental  housing in the U.S. as the vacancy rate is the lowest since the mid-1980’s.  By focusing on this category builders will help to alleviate some of the extreme shortage of rental units.


New home sales reached a peak of 993 thousand in January of 2021  Home sales have fallen sharply since the beginning of last year as higher interest rates and much higher home prices cut into the potential home buyers willingness and/or ability to purchase a home.   At the same time builders grappled with an inability to find an adequate number of new workers, and the challenge of getting the construction materials they need at a reasonable price.  However, as mortgage rates have declined from 7.0% to 6.5% and home prices have declined somewhat, new home sales have begun to rebound.  In addition, existing homes for sale remain in very short supply as current home owners are reluctant to put their house on the market and replace their existing 3.0% mortgage rate for a 6.5% rate.

Private nonresidential construction rose 2.4% in April after climbing 1.0% in March and jumping 5.7% in February.   In the past year nonresidential spending has risen 31.2%,.  The 12-month increase has been led  by lodging, commercial space, educational, transportation, and manufacturing.  In short, the double-digit gain has been evident in many categories.

Public sector construction rose 1.1% in April after having been unchanged in March after having risen 2.3% in February.  In fact, this category has been climbing for the.past 10 months.   In  the past year such spending has risen 16.5%.  The increase in this category in the past year has been led by construction of  commercial space, health care, educational, amusement and recreation, power, highway and street, sewage and waste disposal, water supply, and conservation and development.

.Stephen Slifer


Charleston, SC