August 2011 U.S. Construction

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Overall construction spending in the United States increased by 1.4 percent during August, to a seasonally adjusted and annualized rate (SAAR) of $799.1 billion. All categories posted increases, but public construction showed the largest advance in both absolute and percentage terms.
 

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Although the value of residential construction put in place rose in August, total housing starts declined -- by 5.0 percent, to 571,000 units (SAAR).
 

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The drop in total starts was primarily the result of a fallback in the multi-family category, which retreated by 24,000 units (13.5 percent).
 

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New-home sales retreated again in August, by 2.3 percent to 295,000 (SAAR). The median price of new homes sold also dropped by 8.7 percent, to $209,000. Despite single-unit starts declining more slowly than sales (6,000 versus 7,000, respectively), the starts-to-sales ratio ticked down to 1.4.
 

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Single-unit completions fell by 0.2 percent, but the inventory of new single-family homes shrank slightly in absolute terms while months of inventory bumped 0.1 month higher. Inventory stood at 162,000 units and 6.6 months. Once again, the number of new homes for sale was its lowest since such records began in January 1963.
 

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Existing home sales fared much better than their new-home counterparts in August, rising by 360,000 units (SAAR) or 7.7 percent. The share of total sales comprised of new homes shrank to 5.5 percent.
 

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With the median price of existing homes sold falling by $3,300 (1.9 percent), to $168,400, housing affordability improved again in August. This followed on the heels of mixed results in the seasonally adjusted 10- and 20-city S&P/Case-Shiller home price indices during July (less than +/-0.1 percent in either case).

“With July’s data we are seeing not only anticipated monthly increases [on a seasonally unadjusted basis], but some fairly broad improvement in the annual rates of change in home prices,” said David Blitzer, chair of the Index Committee at S&P Indices. “This is still a seasonal period of stronger demand for houses, so monthly price increases are expected and were seen in 17 of the 20 cities. The exceptions were Las Vegas and Phoenix where prices fell, while Denver was flat. The better news is that 14 of 20 cities and both Composites saw their annual rates of change improve in July.

“While we have now seen four consecutive months of generally increasing prices, we do know that we are still far from a sustained recovery. Eighteen of the 20 cities and both Composites are showing that home prices are still below where they were a year ago. The 10-City Composite is down 3.7 percent and the 20-City is down 4.1 percent compared to July 2010. Continued increases in home prices through the end of the year and better annual results must materialize before we can confirm a housing market recovery.
 

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“As with May and June’s reports, we saw some unusually large revisions across some of the MSAs. In particular, Detroit was most affected in July, with the revisions showing a much healthier market than previously thought. Our sales pairs data indicate that this market reported a lot more sales in May and June, which caused the revisions. As we have indicated before, when sales volumes are relatively low and the ratios of distressed-to-non-distressed sales are changing rapidly, revisions are more noticeable. These factors likely contributed to the revisions we saw not just in Detroit, but in many of the MSAs over the past few reports.

“Other recent housing statistics show that single-family housing starts were down slightly in August, and are about 2 percent below their year ago level; and these levels are at 30-year lows. Existing-home sales, however, were up in August and are about 20 percent above their August 2010 level. The S&P/Experian Consumer Credit Default indices showed a continuing decline in mortgage default rates, a two-year trend. However, if you look at the state of the overall economy and, in particular, the recent large decline in consumer confidence, these combined statistics continue to indicate that the housing market is still bottoming and has not turned around.”
 

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