June 2012 U.S. Construction

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Overall construction spending in the United States increased by 0.4 percent during June, to a seasonally adjusted and annualized rate (SAAR) of $842.1 billion. All categories advanced except for public construction, which was essentially unchanged relative to May.
 

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Total housing starts rose by 6.9 percent in June, to 760,000 units (SAAR). Single-family starts increased to 539,000 units (by +24,000 units or 4.7 percent) relative to May; at the same time, multi-family starts also increased to 221,000 units (+15,000 units or 12.8 percent).
 

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New-home sales retreated by 8.4 percent in June, to 350,000 (SAAR). The median price of new homes sold ticked down, by 1.9 percent, to $232,600. Although the change in single-unit sales (-32,000) fell below that of starts (+24,000 units), the three-month average starts-to-sales ratio ticked up to 1.44 in June.
 

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Single-unit completions rose by 1.3 percent; the inventory of new single-family homes increased in absolute terms (+1,000), and months of inventory increased by 0.4 month. Inventory stood at 144,000 units and 4.9 months.
 

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Existing home sales dropped by 250,000 (-5.4 percent) in June, to 4.37 million units (SAAR). The share of total sales comprised of new homes dropped from 7.6 to 7.4 percent.
 

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The median price of existing homes sold in May jumped by $8,800 (5.0 percent), to $182,900, causing housing affordability to continue plummeting from its all-time high in February.

Simultaneously, the not seasonally adjusted 10- and 20-city S&P/Case-Shiller home price indices extended the previous month’s increase by each rising 2.2 percent in April.

“With May’s data, we saw a continuing trend of rising home prices for the spring,” said David Blitzer, chair of the Index Committee at S&P Indices. “On a monthly basis, all 20 cities and both Composites posted positive returns and 17 of those cities saw those rates of change increase compared to what was observed for April. Seventeen of the 20 cities and both Composites also saw improved annual rates of return. We have observed two consecutive months of increasing home prices and overall improvements in monthly and annual returns; however, we need to remember that spring and early summer are seasonally strong buying months so this trend must continue throughout the summer and into the fall.

“The 10- and 20-City Composites were each up 2.2% for the month and recorded respective annual rates of decline of 1.0% and 0.7%, compared to May 2011. While still negative, these annual changes are the best we’ve since in at least 18 months.

“Taking a closer look at the cities, Phoenix again posted the best annual return. Average home prices in that region were up 11.5% versus May 2011. It was one of the hardest hit cities in the collapse, and prices are still more than 50% below their June 2006 peak, but the past five months have been positive for that market. Miami and Tampa are two other Sunbelt cities that were hard-hit in the downturn, but are now showing positive annual rates of change. Boston, Charlotte and Detroit, on the other hand, saw their annual rates of return deteriorate compared to April, even though prices rose over the month of May. Las Vegas posted both a positive monthly change in May and saw an improvement in its annual return; that said, the market is still more than 60% below it August 2006 peak.

“June data for existing home sales, new home sales, housing starts and mortgage default rates were a bit mixed, but all are better than their year-ago levels. The housing market seems to be stabilizing, but we are definitely in a wait-and-see mode for the next few months.”