News & Opinions
The latest news and insights from Hanley Wood’s outspoken experts and key thought-leaders throughout the residential and commercial design and construction industry.
Eye on the Economy: Rising Home Prices and Construction
David Crowe / NAHB / July 11, 2013
Rising home prices and increasing residential construction have been the clearest signs of the housing rebound that took hold in 2012 and continues into 2013. Data from the start of the summer are consistent with these long-run trends, offering a bright spot in otherwise lackluster economic environment.
Total private residential construction spending increased to a seasonally adjusted annual rate of $328.6 billion in May 2013, the fastest pace of residential construction since October 2008. The reading is 1.2% above the positively revised April estimate and 22% higher over a year ago.
All three components of residential construction spending registered gains. New multifamily construction spending showed the largest increase, rising 2.5% since April and 51.7% since May 2012. Demand for multifamily remains strong, with real rents up 1.1% over the past year.
Spending on new single-family homes increased to an annual rate of $166.3 billion, a rate unseen since August 2008. On a year-over-year basis, new single-family construction spending increased 33.2%.
Breaking the decline that started in January 2013, home improvement spending also registered gains. Remodeling spending increased to an annual rate of $124.2 billion, 1.9% above the April reading, 7% above the year ago, but still below the spending rate registered during the first quarter of 2012.
The expansion of residential construction spending has benefitted most housing markets across the nation. The July NAHB/First American Improving Markets Index (IMI) dropped slightly to 255 from 263 in June. The number of markets that are improving remains at more than 70% of all metropolitan areas with sufficient data (361). The stabilizing of the IMI for the past six months is a natural outcome of a full national recovery with some local variation in price growth.