September 2011 U.S. Construction

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Overall construction spending in the United States increased by 0.2 percent during September, to a seasonally adjusted and annualized rate (SAAR) of $787.2 billion. All categories except public construction posted increases; the private residential category exhibited the largest advance in both absolute and percentage terms.
 

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Total housing starts jumped by 15.0 percent in September, to 658,000 units (SAAR), on increased demand for rental stock (51.3 percent increase in multi-family units) and rebuilding after Hurricane Irene. Total starts were at their highest level since April 2010.
 

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New-home sales also advanced in September, by 5.7 percent to 313,000 (SAAR). The median price of new homes sold dropped by 3.1 percent, however, to $204,400. Because single-unit starts rose more slowly than sales (respectively, 7,000 versus 17,000), the starts-to-sales ratio ticked down to 1.4.
 

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Single-unit completions slumped by 11.6 percent, but the inventory of new single-family homes remained unchanged in absolute terms while months of inventory shrank by 0.4 month. Inventory stood at 163,000 units and 6.2 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 worse than their new-home counterparts in September, falling by 150,000 units (SAAR) or 3.0 percent. The share of total sales comprised of new homes ticked up to 6.0 percent.
 

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With the median price of existing homes sold falling by $5,600 (3.3 percent), to $165,600, housing affordability improved noticeably in September. This followed on the heels of slight increases in the not seasonally adjusted 10- and 20-city S&P/Case-Shiller home price indices during August (both +0.2 percent).

“There was some weakness in the monthly statistics, as 10 of the cities posted price declines in August over July,” said David Blitzer, chair of the Index Committee at S&P Indices. “And even though the annual rates are largely improving, 18 metropolitan statistical areas (MSA) and both composites are still negative. Nationally, home prices are still below where they were a year ago. The 10-city composite is down 3.5 percent and the 20-city is down 3.8 percent compared to August 2010.
 

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“In the August data, the good news is continued improvement in the annual rates of change in home prices. In spring and summer’s seasonally strong period for housing demand, we cautioned that monthly increases in prices had to be paired with improvement in annual rates before anyone could declare that the market might be stabilizing. With 16 of 20 cities and both Composites seeing their annual rates of change improve in August, we see a modest glimmer of hope with these data. As of August 2011, the crisis low for the 10-city composite was back in April 2009; whereas it was a more recent March 2011 for the 20-city composite. Both are about 3.9 percent above their relative lows.

“The Midwest is one region that really stands out in terms of recent relative strength. Chicago, Detroit and Minneapolis have all posted very sharp monthly increases going back to May. These markets were some of the weakest during the crisis, particularly Detroit. But as of August 2011, Detroit is the healthiest when viewed on an annual basis. It is up 2.7 percent versus August 2010. Prices there are still back to their 1995 levels, but the recent pickup in the US auto industry may finally be helping.

“As seen in our past few monthly reports, there were large revisions across some of the MSAs. In particular, Washington D.C. was the most affected in August. Additional sale pairs data for May to July 2011 in the Washington D.C. MSA were received this month and resulted in the revisions.”
 

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