July 2011 U.S. Construction

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Overall construction spending in the United States decreased by 1.3 percent during July (from an upwardly revised June figure), to a seasonally adjusted and annualized rate (SAAR) of $789.5 billion. All categories posted decreases, but public construction showed the largest decline in both absolute and percentage terms.
 

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Not only did the value of residential construction put in place fall in July, but so too did total housing starts -- by 1.5 percent, to 604,000 units (SAAR).
 

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The decline in total starts was entirely the result of a fallback in the single-family category, as multi-family starts rose by 13,000 (7.8 percent).
 

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New-home sales retreated again in July, by 0.7 percent to 298,000 (SAAR). The median price of new homes sold also dropped by 6.3 percent, to $222,000. With single-unit starts declining more slowly than sales, the starts-to-sales ratio jumped nearly to 1.5, toward the upper end of the typical historical range seen since 2000.
 

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Although completions rose by 6.1 percent, the inventory of new single-family homes shrank slightly in absolute terms while months of inventory stabilized. Inventory stood at 165,000 units and 6.6 months. Once again, the number of new homes for sale was the lowest since such records began in January 1963.
 

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Existing home sales fared much worse than their new-home counterparts in July, falling by 170,000 units (SAAR) or 3.5 percent. The share of total sales comprised of new homes remained nearly unchanged at 6.0 percent.
 

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With the median price of existing homes sold falling by $1,300 (0.9 percent), to just shy of $175,000, housing affordability improved slightly in July. This followed on the heels of an uptick in the seasonally adjusted 10-city and a correspondingly small decrease in the 20-city S&P/Case-Shiller home price index during June (less than 0.1 percent in each case).

“This month’s report showed mixed signals for recovery in home prices,” said David Blitzer, chair of the Index Committee at S&P Indices. “No cities made new lows in June 2011, and the majority of cities are seeing improved annual rates. The National Index was up 3.6 percent from 1Q2011, but down 5.9 percent compared to a year-ago. Looking across the cities, eight bottomed in 2009 and have remained above their lows. These include all the California cities plus Dallas, Denver and Washington DC, all relatively strong markets. At the other extreme, those which set new lows in 2011 include the four Sunbelt cities -- Las Vegas, Miami, Phoenix and Tampa -- as well as the weakest of all, Detroit. These shifts suggest that we are back to regional housing markets, rather than a national housing market where everything rose and fell together.
 

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“As with May’s report, June showed unusually large revisions across the same metropolitan statistical areas (MSAs) -- Detroit, New York, Tampa and Washington DC. Our sales pairs data indicate that, once again, these markets reported a lot more sales closing in prior months, which caused the revisions. Since deed recording is usually county based, if the price trends across counties are very different, then delays from a subset of counties can lead to larger revisions. And data lag lengths tend to vary across the counties within a metro area. If counties with relatively stronger/weaker markets report sales with longer/shorter lags, this will result in larger revisions as we receive the lagged data. Revisions are also likely to be larger when sales volumes are low or the proportions of distressed/non-distressed sales are changing rapidly. Any and all of these factors are likely contributing to the revisions we have seen over the past few reports.

“Nineteen of the 20 MSAs and both Composites were up in June over May. Portland was flat. Cleveland has improved enough that average home prices in this market are back above its January 2000 levels. Only Detroit and Las Vegas remain below those levels.”
 

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