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Construction dollars continue to rise in the midst of an inventory deprived housing market. Could the shortage of housing options be coming to an end?
Spending in the construction sector rose to $1,140.8 billion in January 2016, up 10.4 percent from the January 2015 estimate of $1,033.3 billion and the highest since October 2007, the U.S. Census Bureau of the Department of Commerce reported Tuesday. Month-over-month, construction spending in January increased 1.5 percent from December's estimate of $1,123.5 billion.
Private construction spending reached $831.4 billion in January , 0.5 percent above the revised December estimate of $827.3 billion, the Bureau said.
Source: National Association of Home Builders
Residential construction came in at $433.2 billion in January, almost the same as December's estimate of $433.1 billion, while nonresidential construction rose 1.0 percent from $394.2 billion in December to $398.2 billion in January.
Recent reports have shown that increasing demand and low inventory levels are fueling home prices and are likely the driving factor of the uptick in construction spending
"The steady increase in residential starts in 2015 has produced a steady increase in the number of homes under construction although carrying them through to completion slowed a bit as labor shortages, especially finishing carpenters, slow the ability to get finishing touches done," said David Crowe, National Association of Home Builders Chief Economist and SVP.
Realtor.com Chief Economist Jonathan Smoke noted that the housing industry needs stronger growth in construction and that the picture will only worsen if this negative trend continues.
"At our current pace of activity and taking into account loss of housing stock due to disaster and dilapidation, we're building new units at less than half the pace at which we are forming households," Smoke said. The housing shortage only worsens if this remains the picture. Tight supply of homes for sale and low vacancies will continue to be the norm, and along with that, higher rents and prices."
