September Private Residential Construction Spending Inches Up

NAHB analysis of Census Construction Spending data shows that private residential construction spending rose 0.6% in September, after a 1.3% increase in August. It stood at a seasonally adjusted annual pace of $872 billion. However, total private residential construction spending is still 2.2% lower compared to a year ago.

The total construction monthly increase is attributed to more spending on single-family construction and improvements. Spending on single-family construction rose 1.3% in September. It was the fifth consecutive monthly increase since April 2023. Compared to a year ago, spending on single-family construction was 5.9% lower. Multifamily construction spending dipped 0.1% in September but was 22.3% over the September 2022 estimates, largely due to the strong demand for rental apartments. Private residential improvement spending edged up 0.2% in September and was 5.4% lower compared to a year ago.

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 was up 21.3% over a year ago. The annual private nonresidential spending increase was mainly due to higher spending on the class of manufacturing category ($76 billion), followed by the power category ($9.8 billion).