Private Residential Construction Spending Rises in April

Private residential construction spending inched up 0.5% in April, as spending on multifamily homes increased 0.6%. Private residential construction spending increased for the first time since June 2022 amid elevated mortgage interest rates. However, it is still 9.2% lower compared to a year ago.

The total construction monthly increase is largely attributed to more spending on multifamily construction, which rose 0.6% in April. It was the 9^th monthly consecutive increase since August 2022. It was 24.9% over the April 2022 estimates, largely due to the strong demand for rental apartments. Private residential improvement spending rose 1.7% in April and was 2.1% higher compared to a year ago.

Spending on single-family construction decreased 0.8% in April, which has been declining since June 2022. Compared to a year ago, spending on single-family construction was 24.7% lower. This is consistent with a pull back for single-family home building, as surging interest rates cooled the housing market during 2022.

Keep in mind that construction spending reports the value of property put-in-place. Per the Census definition: The “value of construction put in place” is a measure of the value of construction installed or erected at the site during a given period. The total value-in-place for a given period is the sum of the value of work done on all projects underway during this period, regardless of when work on each individual project was started or when payment was made to the contractors. For some categories, published estimates represent payments made during a period rather than the value of work done during that period.

The NAHB construction spending index, which is shown in the graph below (the base is January 2000), illustrates how construction spending on single-family has slowed since early 2022 under the pressure of supply-chain issues and elevated interest rates. Multifamily construction spending has had solid growth in recent months, while improvement spending has slowed since mid-2022. Before the COVID-19 crisis hit the U.S. economy, single-family and multifamily construction spending experienced solid growth from the second half of 2019 to February 2020, followed by a quick post-covid rebound since July 2020.

Spending on private nonresidential construction increased by 2.4% in April to a seasonally adjusted annual rate of $655 billion. The monthly private nonresidential spending increase was mainly due to more spending on the class of manufacturing category ($15 billion), followed by the commercial category ($0.9 billion).