Private residential construction spending increased by 2.2% in May and spending on single-family homes increased 1.7%, according to an NAHB analysis of Census Construction Spending data. Despite the increase, private residential construction spending is 11.6% lower compared to the same period in 2022.
The total construction monthly increase is largely attributed to more spending on single-family construction. It is consistent with the solid gains of single-family starts and the boosting builder confidence in May. Spending on single-family construction rose 1.7% to a $371.3 billion annual pace. It was the first monthly increase since a series of negative growth rates that started in May 2022, amid the elevated mortgage interest rates.
Compared to a year ago, spending on single-family construction was 25% lower. Multifamily construction spending dipped 0.1% in May. It was 20.4% over the May 2022 estimates, largely due to the strong demand for rental apartments. Private residential improvement spending rose 3.4% in May but was 2.7% lower compared to a year ago.
The NAHB construction spending index illustrates how construction spending on single-family homes has slowed since early 2022 under the pressure of supply-chain issues and elevated interest rates. Multifamily construction spending has had solid growth in recent months, while improvement spending has slowed since mid-2022. Before the COVID-19 crisis hit the U.S. economy, single-family and multifamily construction spending experienced solid growth from the second half of 2019 to February 2020, followed by a quick post-COVID rebound since July 2020.
