Off the Charts: Census Reports Home Construction Has Improved

That seemingly contradictory statement was illustrated by construction spending statistics issued this week by the Census Bureau. In April, spending on the construction of new houses and apartment buildings reached an annual rate of $195 billion. As can be seen in the accompanying charts, spending on home building is up 40 percent over the last year.

That is the largest such increase since the early 1980s. In the housing boom that preceded the Great Recession, such spending never rose more than 25 percent over a 12-month period.

But that rate of spending is down more than 60 percent from the peak, reached in 2006, and is lower than spending as far back as 1997.

The figures are not adjusted for inflation. Were they so adjusted, the current level of spending would be even lower compared with the pace of building in past years.

The charts are based on three-month averages of annual rates, in an effort to smooth out fluctuations caused by weather.

Over all, total construction spending is running at an annual rate of about $861 billion, or 28 percent less than the 2006 peak.

Private construction for things other than home construction continued to expand well after home building activity turned lower in 2006, and did not fall as far during the Great Recession. But the recovery in such spending last year has faded, and the latest figures show spending in that area is falling.

But that spending is not falling as rapidly as public spending on construction, which is dominated by spending by state and local governments. The latest figures show such spending is shrinking at an annual rate of 4 percent. Not since 2009 has such spending risen on a year-over-year basis.

While homebuilding activity is rising rapidly, some areas of spending that were strong during the boom have still shown few signs of revival. Spending on what the government calls multiretail building, including shopping centers and department stores, remains 60 percent below the peak, and after rising last year is again declining.

The proportion of the work force employed in the financial industry has fallen to the lowest figure since 1981, and that is showing up in spending on construction of offices for financial firms. That spending is running at a rate of about $1.7 billion a year, a figure that is lower than at any time since the government began collecting the statistic in 1993.

Within public construction spending, some areas have held up better than others. Among state and local governments, spending on construction of primary and secondary education buildings is running 40 percent below peak levels, but spending on higher education buildings is down only 15 percent, although both areas are declining in the most recent reports. As a result, the higher education share of total education spending is about 37 percent. Before the recession, the share was usually under 30 percent.

Article source: http://www.nytimes.com/2013/06/08/business/economy/census-reports-home-construction-has-improved.html?partner=rss&emc=rss