Key Takeaways:

• Remodeling spending dipped slightly for the second consecutive month
• Residential construction represents 62 percent of the market
• Over half of the residential construction spending is for single-family housing

By Manuel Gutierrez, Consulting Economist to NKBA

Private construction spending was virtually unchanged in October, dropping just 0.2 percent to $1.245 trillion, an 11 percent gain over last year.

The primary driver of the nominal spending drop was the residential sector, which fell 0.5 percent to $775 billion (Figure 1.) Residential currently accounts for 62 percent of the private construction market. The smaller non-residential sector, representing the remaining 38 percent of the private market, improved modestly by 0.2 percent to $470 billion.

Single-family housing, the largest component of residential construction spending, comprises over half of the residential sector. In October, construction of new single-family homes was $412 billion (Figure 2).

Single-family construction is tracking demand, up 23% over a year ago.

Remodeling by homeowners, the second largest component in spending, grew at an annual pace of $262 billion in October. This segment represents 33.8 percent of all residential construction.

Note that a decade ago(Figure 2), single family and homeowner remodeling spending had nearly equal shares of the residential market. Soon after, single-family spending rose at a considerably faster rate than remodeling, resulting in today’s fifteen-point gap.

Construction of multifamily housing units (Figure 2) amounted to $100 billion in October, just under 13 percent of the residential sector.

Although difficult to discern in Figure 2, the three residential sector components fell in October.

Single-family construction posted the biggest decline, dropping 0.8 percent to $472 billion in October.

Single-family building is up 23 percent year-over-year, but the pace of annual gains has slowed from over 46 percent in May.

Multi-family construction barely moved in October, falling just 0.1 percent to $100 billion. In fact, construction of multi-family housing units has remained slightly over $100 billion for the last five months.

Spending by homeowners for remodeling projects was down 0.2 percent to $262 billion in October, a drop that followed a 0.5 percent decline in September.

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