Key takeaways:
- Both residential and non-residential segments fall
- Residential accounts for 63 percent of the overall market, up from the 53 percent at the end of 2019
- Single-family, multifamily and homeowner remodels all fall in the latest residential monthly reading
By Manuel Gutierrez, Consulting Economist for NKBA
Total private construction spending fell 0.5 percent to $1.23 trillion in September, a decrease for the third consecutive month. The declines have broken a pattern of steady gains in construction spending since June 2020, a pattern only broken in February when spending fell by a modest 0.6 percent.
In September, both major components of the construction market pulled back: Residential construction spending fell 0.42 percent to $774 billion, while nonresidential fell 0.64 percent to $456 billion.
The smaller drop for residential spending resulted in the segment showing a slight increase in share of the total market. It currently accounts for 63 percent of the private construction market market (Figure 1, bottom panel), a sharp increase since the end of 2019, when residential represented only 53 percent.
Within this sector —most relevant to NKBA members’ businesses—all three segments fell in September. Single family housing, which represents 53 percent of residential construction, fell 0.64 percent to $413 billion (Figure 1).
September marks only the second monthly drop in spending for single-family housing since June 2020. Unquestionably, builders are prevented from building more houses due to material and labor shortages.
Construction of multifamily houses also fell in September, although by a more modest 0.30 percent to $100 million. It’s not surprising that multifamily housing mirrors single-family housing construction, although the decline is significantly smaller.
Construction spending for single-family homes fell for the second consecutive month in September, following steady increases since July of last year.
Residential remodeling by homeowners, the last segment for which the Department of Commerce provides spending estimates, was slightly off in September, falling 0.11 percent to $261 billion.
The Department of Commerce does not compile data for three other residential construction market segments, including rental properties improvements and maintenance spend for both homeowner and rental properties. The Joint Center for Housing Studies at Harvard University generates more comprehensive estimates of the overall remodeling market, releasing a biennial report that can be found here.
The Joint Center estimates rental remodeling at $81 billion, which includes both improvements and maintenance. The Center also estimates homeowner maintenance spending at $71 billion.
As mentioned earlier, spending in the three residential segments provided by the Department of Commerce fell in September.
Spending for single-family housing was hit hardest, falling for the second month after monthly increases since July 2020. The top panel of Figure 2 shows monthly changes in spending over the last year, with increases in spending significantly smaller since January 2021. Spending for multifamily housing is more erratic, but this segment also fell in the last two months. The middle panel of Figure 2 also shows that changes in spending can vary dramatically from one month to the next. As seen, spending by homeowners for remodeling has been fluctuating each month.
Charts:
