Single-family and multifamily housing register gains, while residential remodeling cools a bit from record levels.
By Manuel Gutierrez, Consulting Economist to NKBA
The two major segments of the U.S. construction market, Residential and Non-residential, continue to move in opposite directions. Residential construction remains on an upward path with its total value reaching $611 billion in September, up 2.8% from the previous month. Year-to-date for the first nine months of 2020, it is 7.8% higher than last year.
In contrast, the non-residential segment contracted further in September, with spending down to $464 billion for the month. This is a 1.5% decline from the previous month.
Year-to-date, however, non-residential construction is just 0.6% below last year. Non-residential construction had been improving over the last half of 2019, but began to fall at the end of the year.
Residential construction today accounts for 57% of total private construction, slightly higher than its long-term average of 56%, identified by the dashed horizontal line in the chart below.
The share fluctuated sharply during the boom-bust cycle of 2004-to-2010. Residential construction reached a high of $625 billion in 2004 and accounted for 71% of private construction value, only to drop to $246 billion by 2010, or 39% of all private construction spending in that year.
Within the residential sector, construction spending rose for two of its three components. Spending for single-family housing rose a robust 6% in the month to an annual rate of $306 billion, bringing spending to just 2% lower than the post-Great Recession peak rate of $312 billion, seen this past February.
The value of construction added in multifamily housing was also up in September, but at a much more modest 1%, for an annual pace of $88 billion. This is the highest level for multifamily housing construction since 1993, when the data first became available.
However, the last component, Residential Remodeling among homeowners, disappointed by falling 0.4% in September, to an annual rate of $217 billion. It should be noted, though, that value added for the month of September was the second highest historically, with spending in August the highest ever.
Single-family housing remains the largest component of the residential segment, capturing half of the construction value. Construction of Multifamily housing units represents 1 in 7 construction dollars, or 14% of the total, while Homeowner Remodeling is over one-third of the value (36%).
Unfortunately, the Department of Commerce, the government agency that gathers this data, does not provide estimates of remodeling in multifamily rental units, nor spending for general repairs and maintenance of residential properties.
