January 2013 U.S. Construction

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Overall construction spending in the United States decreased by 2.1 percent during January, to a seasonally adjusted and annualized rate (SAAR) of $883.0 billion. Although private residential spending was unchanged, the other categories retreated.

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Total housing starts fell in January, to 890,000 units SAAR (-83,000 units or 8.5 percent relative to December). The decrease originated in the multi-family sector (-88,000 units or 24.1 percent) as single-family units rose modestly (+5,000 units or 0.8 percent). 

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December’s “raw” starts aligned with their seasonally adjusted counterparts. Total unadjusted starts were at their lowest level since March 2012, thanks to a 6,400 unit (24.4 percent) drop in the multi-family category.

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Sales of new single-family homes jumped by 59,000 units (15.6 percent) to 437,000 (SAAR). The median price of new homes sold retreated, however, by 9.4 percent, to $226,400. Although the change in single-unit starts (+5,000) was exceeded by that of sales (+59,000), the three-month average starts-to-sales ratio remained essentially unchanged at 1.5 in January.

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Single-unit completions advanced by 7.0 percent, while -- despite remaining unchanged in absolute terms -- the inventory of new single-family homes fell in months-of-sales (to 4.1 months) terms.

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Existing home sales advanced to 4.92 million units (+20,000 units or 0.4 percent, SAAR) in January. The share of total sales comprised of new homes showed some life when jumping to 8.2 percent. The median price of previously owned homes sold in January fell by $6,600 (3.7 percent), to $173,600.

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Housing affordability remained essentially unchanged as the median price of existing homes for sale rose by a modest $900 (+0.5 percent) in December. Simultaneously, Standard & Poor’s reported that both the 10- and 20-City Composites in the S&P/Case-Shiller Home Price indices posted monthly gains of 0.2 percent in November. The 10- and 20-City Composites reported respective annual returns of 5.9 and 6.8 percent for all of 2012.

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"Home prices ended 2012 with solid gains," said David M. Blitzer, chair of the Index Committee at S&P Dow Jones Indices. "Housing and residential construction led the economy in 4Q2012. In December's report all three headline composites and 19 of the 20 cities gained over their levels of a year ago. Month-over-month, nine cities and both Composites posted positive monthly gains. Seasonally adjusted, there were no monthly declines across all 20 cities.

"The National Composite increased 7.3 percent over the four quarters of 2012. From its low in the first quarter, it surged in the second and third quarter and slipped slightly in the 2012 fourth period. The 10- and 20-City Composites, which bottomed out in March 2012 continued to show both year-over-year and monthly gains in December. These movements, combined with other housing data, suggest that while housing is on the upswing some of the strongest numbers may have already been seen.

"Atlanta and Detroit posted their biggest year-over-year increases of 9.9 percent and 13.6 percent since the start of their indices in January 1991. Dallas, Denver, and Minneapolis recorded their largest annual increases since 2001. Phoenix continued its climb, posting an impressive year-over-year return of 23.0 percent; it posted eight consecutive months of double-digit annual growth."

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With builders’ confidence in the residential market steady in January, the number of permits applied for nudged higher on a SAAR basis. Total permits rose to 925,000 units (+16,000 units or 1.8 percent) on the strength of single-family units (+11,000 units or 1.9 percent, to 584,000 units); multi-family units also rose by a more meager 5,000 units (+1.5 percent), to 325,000 units. Total permits were 40.5 percent higher in January than a year earlier.

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The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.