Private Residential Construction Spending Expands in January

The Census Bureau and Commerce Department have released Construction Spending data for January 2011.

 

Residential construction spending includes remodeling, additions, and major replacements to owner occupied properties subsequent to completion of original building. It includes construction of additional housing units in existing residential structures, finishing of basements and attics, modernization of kitchens, bathrooms, etc. Also included are improvements outside of residential structures, such as the addition of swimming pools and garages, and replacement of major equipment items such as water heaters, furnaces and central air-conditioners. Maintenance and repair work is not included.

Plain and Simple: Private Non-Residential Spending contracted at an annualized rate of 6.9 percent in January. This is the lowest level of private nonresidential spending since August 2004 and the largest source of weakness in the broader spending report. Private Residential Construction Spending improved at an annualized rate of 5.3 percent in January. As you can see in the chart above, private residential spending in the mid-2000s rose at an unsustainable pace and consequently stole demand from future generations in the process. Now we're seeing a stagnation in the new residential construction market as a result. While we are not excited about the single-family building outlook, we would expect spending on multi-family residential structures to expand as private investors attempt to fill housing rising demand for rental units. We would also expect to see renovation spending increase as private investors rebuild the glut of dilapidated foreclosed inventory on the housing market.

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Source: http://www.mortgagenewsdaily.com/03012011_january_construction_spending.asp

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