3 Great Signs for Residential Housing Construction

by Peter Thomas Ricci

Today’s report on construction spending was just the latest positive sign for the nation’s residential housing construction market.

The latest construction numbers came out today from the U.S. Census Bureau, and they were promising: at a seasonally adjusted annual rate of $934.4 billion, construction spending in November was up 1.0 percent from October and 5.9 percent from November 2012 to its highest level since March of 2009. During the first 11 months of 2013, construction spending amounted to $828.4 billion, 5.0 percent above the the same period in 2012.

Today’s numbers, though, are not the only positive development for construction. Here are three other positive signs for the construction marketplace:

1. Residential Construction is Back on Top – At $659.4 billion, private construction (which includes residential) was up 2.2 percent in November, while residential construction specifically was up 1.9 percent. Though residential remains 49 percent below its early 2006 peak, according to Bill McBride’s latest calculations, it was up 24 percent on a year-over-year basis in November, and is once again the largest category for construction spending, a historical marker that bodes well for the housing market.

2. Significant Increase for New Home Sales – Meanwhile, new home sales were up 16.6 percent year-over-year in November, continuing a very strong 2013; in the first 11 months of 2013, new home sales were up 17.6 percent over the same period in 2012. And really, new home sales have no where else to go but up. Even with its strong performance, 2013 will still be, at roughly 433,000 sales, the sixth weakest year of new home sales since 1963. And with sales expected to increase to 750-800 thousand over the next several years, you can see how much room remains for growth.

3. Distressing Gap is Closing – Though new home sales are increasing, existing-home sales still outnumber new sales by a 10:1 ratio, which is far above the historical ratio of 6:1. Thankfully, though, that “distressing gap,” as McBride calls it, is starting to close. The distressing gap resulted from two things – the preponderance of distressed inventory on the market, and the extremely low levels of new construction, which caused existing-home sales to balloon and new home sales to collapse. With that gap closing, though, we are that much closer to a more stable housing market.

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  • RSH Professionals says:

    Hello Jason, greetings from Germany. I truly hope that peoples have learned something out of the past. 4. Home prices will rise 3%
    it has been predicting that home prices will rise between 3% and 5% in 2014. For comparison’s sake, 2013 saw jumps of 5% nationally, with increases of more than 20% in some hot spots. “These gains, while beneficial in many ways, were also unsustainable and well above historic norms for healthy, balanced markets. This year, home value gains will slow down significantly because of higher mortgage rates, more expensive home prices, and more supply created by fewer underwater homeowners and more new construction.

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