February 2011 U.S. Construction

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Overall construction spending in the United States decreased by a seasonally adjusted and annualized rate (SAAR) of 1.4 percent during February, to $760.6 billion. Private residential construction took the biggest hit, falling 3.7 percent; only the non-residential category gained ground, rising by 0.9 percent.
 

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Residential construction could only be described as “abysmal.” Total housing starts fell by 22.5 percent, to 479,000 units in February. That is the second-lowest level of activity since the Census Bureau began collecting housing data; only April 2009’s reading of 477,000 units was worse.
 

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The contraction in starts was nearly twice as severe in the multi-family component than the single-family component. Single-family starts fell by 50,000 (SAAR) while multi-family starts dropped by 89,000 units.
 

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New-home sales were equally disappointing, slumping by 16.9 percent to 250,000 (SAAR) in February -- the lowest pace on record. The median price of new homes sold dropped by 13.9 percent, to $202,100 -- the lowest nominal price since December 2003.
 

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Because sales fell while completions rose, the inventory of new homes rose in months-of-inventory terms even though the absolute number of available homes was essentially unchanged. Inventory stood at 186,000 units and 8.9 months (up from 7.4 months).
 

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Existing home sales fared somewhat better than their new-home counterparts in February, declining by a more modest 9.6 percent. That drop snapped three months of gains and was the largest percentage decline since July. New home sales continued to shrink as a percentage of the total; in February, the share of total sales comprised of new homes shrank to 4.9 percent.
 

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Although the median existing home price dropped by $1,500 in February, housing affordability remained nearly unchanged.
 

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Because seasonally adjusted S&P/Case-Shiller home price indices retreated in 12 of 20 metropolitan statistical areas (MSAs) during January, the 10- and 20-city indices also fell. Only Washington DC has seen prices rise on a year-over-year basis.

“Keeping with the trends set in late 2010, January brings us weakening home prices with no real hope in sight for the near future,” said David Blitzer, chair of the Index Committee at Standard & Poor's. “With this month’s data, we find the same 11 MSAs posting new recent index lows [on a seasonally unadjusted basis]. The 10-City and 20-City Composites continue to decline month-over-month and have posted monthly declines for six consecutive months now.

“These data confirm what we have seen with recent housing starts and sales reports. The housing market recession is not yet over, and none of the statistics are indicating any form of sustained recovery. At most, we have seen all statistics bounce along their troughs; at worst, the feared double-dip recession may be materializing. A few months ago we defined a double-dip for home prices as seeing the 10- and 20-City Composites set new post-peak lows. The 10-City Composite is still 2.8 percent above and the 20-City is 1.1 percent above their respective April 2009 lows, but both series have moved closer to a confirmed double-dip for six consecutive months. At this point we are not too far off, and that is what many analysts are seeing with sales, starts and inventory data too.”
 

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