|Construction Spending and GDP on the Rise|
The broader economic environment continues to improve, which is good news for housing and home building.
Real GDP for the final quarter of 2011 rose at a 3% rate, higher than initial estimates. Growth for real residential fixed investment was up 11.5%, compared to 1.3% growth during the third quarter.
Total employment increased in February by 227,000 jobs. Revisions to previous months’ reports resulted in an additional 61,000 jobs. Growth in employment appears to be gaining momentum, yet the unemployment rate held steady in February at an 8.3% rate.
This unchanged unemployment rate is actually due to good news, as previously discouraged workers return to the labor force and search for work. During the Great Recession, the labor force declined by 1.8 million. These loses have just now been recovered, but the labor force remains 3- 4 million below trend levels. These losses in the labor force hold back demand for both rental and owner-occupied housing.
Deleveraging continues to improve household balance sheets. The latest data from the Federal Reserve and the Bureau of Economic Analysis indicates that household net worth relative to income improved during the last quarter of 2011. These improvements decreased the personal savings rate to 4.5%, which is considerably lower than the 6.2% rate set at the height of the crisis in the middle of 2009. A declining savings rate bodes well for future consumption and economic growth. At the
current rate, household deleveraging may be completed in 2013.
Total construction spending for January 2012 reached a two-year high. Spending on new single-family home construction climbed 2.5% and has now increased in each of the last eight months. Year-over-year, single-family construction spending is up 5.5%. Multifamily construction spending was slightly higher in January, and home improvement spending increased for the sixth consecutive month.
The generally improving environment for real estate was corroborated by the most recent edition of the Federal Reserve’s Beige Book. The central bank survey found that most areas of the nation have experienced modest improvements in housing, with multifamily being a key driver of positive change.
Indeed, NAHB survey data suggests future growth for multifamily starts. In the fourth quarter of 2011, the Multifamily Production Index continued to show improvement, increasing for a sixth consecutive quarter, reaching its highest level since the fourth quarter of 2005. The Multifamily Vacancy Index declined for a second consecutive quarter, suggesting declining rental vacancy rates for apartment building owners.
Other analysis appearing on NAHB’s Eye on Housing economics blog included:
- A profile of Longview, Texas, a city appearing on the NAHB/First American Improving Market Index, which now includes 98 metropolitan areas.
- An analysis of the tightest housing markets in the United States using American Community Survey data
- A look at metropolitan areas with the highest homeownership rates
- A study examining the prices of homes that can be purchased by American households given the existing distribution of income
Read more in the following posts from Eye on Housing.