December 2011 U.S. Construction

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Overall construction spending in the United States increased by 1.5 percent during December, to a seasonally adjusted and annualized rate (SAAR) of $816.4 billion. All categories posted increases; the private non-residential category exhibited the largest advance in both absolute and percentage terms (respectively, $9.1 billion and 3.3 percent).
 

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Despite the increase in residential construction spending, total housing starts fell by 4.1 percent in December, to 657,000 units (SAAR) – nearly 25 percent over year-earlier levels, but still more than 71 percent below the January 2006 peak. Single-family starts rose to 470,000 units (by +20,000 units or 4.4 percent); multi-family starts, by contrast, dropped to 187,000 units (by -48,000 units or 20.4 percent), 37.4 percent above year earlier levels.
 

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New-home sales retreated in December, by 2.2 percent, to 307,000 (SAAR). The median price of new homes sold dropped by 2.5 percent, to $210,300. Because single-unit starts rose while sales fell (respectively, 20,000 and -7,000), the three-month average starts-to-sales ratio jumped almost to 1.5 in December.
 

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Single-unit completions fell by 0.9 percent; the inventory of new single-family homes shrank in absolute terms (1,000 units) but expanded in months of inventory (0.1 month). Inventory stood at 157,000 units and 6.1 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 better than their new-home counterparts in December, rising by 220,000 units (SAAR) or 5.0 percent. The share of total sales comprised of new homes ticked down by 0.5 percentage point, to 6.2 percent. The impact of the National Association of Realtors’ recent home sales rebenchmarking exercise can be seen in the steep drop in the existing sales index between December 2006 and January 2007 (red line in the graph above).
 

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Although the median price of existing homes sold rose by $1,100 (0.7 percent), to $165,100, housing affordability crept higher. This followed on the heels of decreases in the not seasonally adjusted 10- and 20-city S&P/Case-Shiller home price indices during October (both -1.3 percent).

“Despite continued low interest rates and better real GDP growth in the fourth quarter, home prices continue to fall. Weakness was seen as 19 of 20 cities saw average home prices decline in November over October,” said David Blitzer, chair of the Index Committee at S&P Indices. “The only positive for the month was Phoenix, one of the hardest hit in recent years. Annual rates were little better as 18 cities and both Composites were negative. Nationally, home prices are lower than a year ago. The 10-City Composite was down 3.6 percent and the 20-City was down 3.7 percent compared to November 2010. The trend is down and there are few, if any, signs in the numbers that a turning point is close at hand.
 

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“The crisis low for the 10-City Composite was April 2009; for the 20-City Composite the more recent low was March 2011. The 10-City Composite is now about 1.0 percent above its low, and the 20-City Composite is only 0.6 percent above its low. From their 2006 peaks, both Composites are down close to 33 percent through November.

“Atlanta continues to stand out in terms of recent relative weakness. It was down 2.5 percent over the month, after having fallen by 5.0 percent in October, 5.9 percent in September and 2.4 percent in August. It also posted the weakest annual return, down 11.8 percent. In addition, Atlanta, Las Vegas, Seattle and Tampa all reached new lows in November.”
 

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