Residential Construction Spending Fades for Second Month

Construction spending decreased 0.5 percent from August to September according to data released by the U.S. Census Bureau. Total spending was at a seasonally adjusted annual rate of $1.574 trillion, 7.8 percent more than was spent in September 2020. Residential construction spending eased back slightly in September, but it and its single- and multifamily components are still running ahead of any 2020 comparisons by double digits.

Total construction spending on a non-adjusted basis was $143.642 billion compared to $147.622 billion in August. For the year-to-date (YTD) construction has consumed $1.178 trillion, 7.1 percent more than the $1.100 spent during the first nine months of last year.

Construction put in place in the private sector was at a seasonally adjusted $1.230 trillion, down from $1.236 trillion the prior month, an 0.5 percent decline. Private spending across all project types was 11.1 percent higher than the previous September.

Spending in the private sector was $110.060 billion in September compared to August when $112.953 billion in private construction was put in place. YTD spending, $917.323 billion is up 11.3 percent year-over-year.

Residential spending dipped 0.4 percent from the prior month to a seasonally adjusted $773.5 billion and was 19.3 percent higher than in September 2020. The changes were similar for single-family and multifamily construction, down 0.6 percent and 0.3 percent, respectively, while remaining 30.4 percent and 10.5 percent higher year-over-year.

Residential spending has been driving the industry for much of 2021, but new construction began to slip in August. The residential sector was buoyed, however, by a 1.1 percent increase in monies spent on renovations. While those numbers are not broken out in the Census report, Na Zhao, an analyst for the National Association of Home Builders (NAHB) said spending on improvements was down 0.1 percent month-over-month. NAHB says supply chain issues, the rising material costs, and labor shortages hampered all three components of residential construction.

Residential spending was at a non-seasonally adjusted rate of $70.215 billion for the month. New single family construction spending totaled $38.099 billion and multifamily accounted for $8.606 billion. YTD residential totals are up 24.9 percent from last year with single-family spending growing 37.4 percent and multifamily up by 17.5 percent.

NAHB's construction spending index, covering 2000 to the present, shows single-family construction and home improvement had strong growth from the second half of 2019 to February 2020, before the COVID-19 hit the U.S. economy, and then quickly rebounded since July of 2020. New multifamily construction spending has picked up the pace after a slowdown in the second half of 2019.

Publicly funded construction spending was down 0.7 percent from August and 2.4 percent year over year at an annual rate of $343.7 billion. Non-adjusted spending during the month was $33.582 billion and was $260.202 YTD. The YTD total is down 5.5 percent from the same nine-month period in 2020. Publicly funding residential spending declined 1.6 percent in September and is 4.4 percent lower than in September 2020.