Rehab and Remodeling Boost Construction Spending

The Census Bureau and CommercernDepartment have released Construction Spending</adata for April 2011.</p

Residential construction spendingrnincludes remodeling, additions, and major replacements to owner occupiedrnproperties subsequent to completion of original building. It includes construction of additional housing units inrnexisting residential structures, finishing of basements and attics,rnmodernization of kitchens, bathrooms, etc. Also included are improvementsrnoutside of residential structures, such as the addition of swimming pools andrngarages, and replacement of major equipment items such as water heaters,rnfurnaces and central air-conditioners. Maintenance and repair work is notrnincluded. Projects are classified as privatelyrnowned or government owned (state, local, or federal government). Therndistinction is made on the basis of ownership during the construction period. READ MORE ABOUT DATA COLLECTION</p

Reuters Quick Recap…</p

RTRS – USrnAPRIL CONSTRUCTION SPENDING +0.4 PCT (CONSENSUS +0.3) TO $765.0 BLN VS MARCHrn+0.1 PCT (PREV +1.4 PCT)</p

RTRS – USrnAPRIL PRIVATE CONSTRUCTION SPENDING +1.7 PCT, PUBLIC SPENDING -1.9 PCT</p

RTRS – USrnAPRIL TOTAL CONSTRUCTION SPENDING LARGEST RISE SINCE +1.1 PCT IN OCTOBER 2010</p

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Excerpts from the Release….</p

The U.S. Census Bureau of the Department of Commerce announced todayrnthat construction spending during April 2011 was estimated at a seasonallyrnadjusted annual rate of $765.0 billion, 0.4 percent (±1.6%)* above the revisedrnMarch estimate of $762.1 billion. The April figure is 9.3 percent (±1.6%) belowrnthe April 2010 estimate of $843.1 billion. During the first 4 months of this year, constructionrnspending amounted to $222.7 billion, 8.4 percent (±1.4%) below the $243.0rnbillion for the same period in 2010. </p

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Residential construction was at a seasonally adjusted annual rate ofrn$232.1 billion in April, 3.1 percent (±1.3%) above the revised March estimaternof $225.1 billion. Nonresidential construction was at a seasonally adjustedrnannual rate of $250.8 billion in April, 0.5 percent (±1.4%)* above the revisedrnMarch estimate of $249.6 billion.rn</p

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Plain and Simple: Besides private residential spending, all aspects of this report indicated a decline in construction outlays in the month of April. Check out the table above to see it with your own eyes. With Housing Starts down 10.6% in April, the only logical explanation for this jump in residential construction spending is an uptick in rehab and renovation projects. HOW DO WE COME TO THAT CONCLUSION? Housing Starts data estimates how much new residential real estate construction occurred in the previous month. New Housing Starts construction means digging has begun. Adding rooms or renovating old ones does not count in Housing Starts data, the builder must be constructing a new home. Housing Starts were down but private residential construction spending was up? Had to be rehabs and renovations….</p

From: HUD Focused on Rebuilding America’s Dilapidated Housing Inventory</p

“Take note of HUD-sponsored initiatives aimed at rebuilding America’s dilapidated housing stock.” says MND’s Managing Editor Adam Quinones. “This is where housing professionals will find the most opportunity in years ahead.  The FHA should reopen the 203(k) program to investors if they want to encourage private investment in the U.S. housing market.”</p

From: Home Remodeling a Forward Indicator of Housing Bottom?</p

“With so many foreclosed properties sitting empty on the market we can expect remodeling and rehabbing to be a leading indicator of a bottom inrn the housing market”, says MND’s Managing Editor Adam Quinones. “We already know there is dearth of affordable rental housing</a available to low income renters. From that perspective, FHA should open its 203(k) program to investors if they want to accomplish their affordable housing goals."