July 2012 U.S. Construction

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Overall construction spending in the United States decreased by 0.9 percent during July, to a seasonally adjusted and annualized rate (SAAR) of $834.4 billion. All categories retreated, especially private residential spending.
 

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Total housing starts fell by 1.1 percent in July, to 746,000 units (SAAR). Single-family starts decreased to 502,000 units (-35,000 units or 6.5 percent) relative to June; at the same time, multi-family starts increased to 244,000 units (+27,000 units or 12.4 percent).
 

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New-home sales advanced by 3.6 percent, to 372,000 (SAAR). The median price of new homes sold ticked down, by 2.1 percent, to $224,200. Although the change in single-unit sales (+13,000) exceeded that of starts (-35,000 units), the three-month average starts-to-sales ratio ticked up to 1.42 in July.
 

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Single-unit completions fell by 5.9 percent; the inventory of new single-family homes decreased in absolute terms (-1,000), and months of inventory increased by 0.2 month. Inventory stood at 142,000 units and 4.6 months.
 

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Existing home sales rose by 100,000 (2.3 percent) in July, to 4.47 million units (SAAR). The share of total sales comprised of new homes increased from 7.6 to 7.7 percent.
 

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The median price of previously owned homes sold in June jumped by $9,900 (5.5 percent), to $190,100, causing housing affordability to continue its descent from the 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 rising, respectively, 2.2 and 2.3 percent in June.

“Home prices gained in the second quarter,” said David Blitzer, chair of the Index Committee at S&P Indices. “In this month’s report all three composites and all 20 cities improved both in June and through the entire second quarter of 2012. All 20 cities and both monthly Composites rose for the second consecutive month. It would have been a third consecutive month had we not seen home prices fall in Detroit back in April.
 

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“The National Composite rose by 6.9 percent in the second quarter alone, and is up 1.2 percent from the same quarter of 2011. The 10- and 20-City Composites closely mimic these results; the 10-City was up 5.8 percent over the quarter and the 20-City was up 6.0 percent. The two Composites also entered positive territory on an annual basis, up 0.1 percent and 0.5 percent, respectively.

“Only two cities – Charlotte and Dallas – saw annual rates of change worsen in June. The other 18 cities and both composites saw improvement in this statistic, and 13 of these had a positive trend. There were only six cities – Atlanta, Chicago, Las Vegas, Los Angeles, New York and San Diego – where the annual rates of change were still negative. Boston’s annual rate was flat. We seem to be witnessing exactly what we needed for a sustained recovery; monthly increases coupled with improving annual rates of change. The market may have finally turned around.

“The regions showed positive results for June. All 20 of the cities saw average home prices rise in June over May and all were by at least 1.0 percent. Detroit was up the most, +6.0 percent, and Charlotte the least, +1.0 percent. The Composites showed the same increases as last month – the 10-City rose by 2.2 percent in June and the 20-City by 2.3 percent. We are aware that we are in the middle of a seasonal buying period, but the combined positive news coming from both monthly and annual rates of change in home prices bode well for the housing market.”
 

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