Private Residential Spending Inches Up in May

NAHB analysis of the Census Construction Spending data shows that private residential construction spending stood at a seasonally adjusted annual rate (SAAR) of $938.2 billion in May. It was 0.2% up over the upwardly revised April estimates of $935.9 billion. On a year-over-year basis, total private construction spending was 19% higher.

These monthly gains are largely attributed to the growth of improvement spending ($354.9 billion SAAR), which was 34.2% higher than a year ago. Spending on single-family and multifamily construction remained virtually unchanged, as housing starts declined further  and  builder confidence weakened in May with home building facing higher interest rates and supply-side headwinds. Single-family construction spending was at a $483.1 billion annual pace in May 2022, 15.1% higher over May 2021. Multifamily construction spending stood at $483.1 billion, 3.6% lower than a year ago.

The NAHB construction spending index, which is shown in the graph below (the base is January 2000), illustrates how construction spending on single-family, multifamily have slowed down the pace since early 2022 under the pressure of supply-chain issues and elevated interest rates. Before the COVID-19 hit the U.S. economy, single-family construction and home improvement experienced solid growth from the second half of 2019 to February 2020, and the quick rebound since July 2020. New multifamily construction spending has picked up the pace after a slowdown in the second half of 2019.

The Census Bureau also published significant revisions of private residential spending data, including single-family, multifamily, and home improvement spending categories. The estimates for single-family and total private residential spending were revised upward since 2015. The chart below shows that revised residential improvement spending are substantially higher throughout 2021 and diverged noticeably in early 2022. The earlier release data showed a small dip in the first quarter of 2022. On the contrary, the revised estimates show significant increase in remodeling spending in early 2022.

Spending on private nonresidential construction increased 3.7% in May on an annual basis to a seasonally adjusted annual rate of $497.8 billion. The annual nonresidential spending increase was mainly due to more spending on the class of power ($19.4 billion), followed by the office ($9.7 billion), and healthcare category ($2.7 billion).