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Real Estate

Homebuilder activity quiets down in January

After jumping 9% in December, construction spending in the U.S. dropped 2.1% to a seasonally adjusted rate of $883.3 billion, according to the U.S. Census Bureau.

The January numbers are still 7.1% higher than the January 2012 estimate of $824.7 billion.

Seasonally adjusted private residential spending dropped 2.6% below the revised December estimate of $630.9 billion, reaching only $614.2 billion in January.

Residential construction showed minimal movement at $304.6 billion in January, relatively unchanged from the December estimate of $304.7 billion.

“The latest report is positive for housing overall but negative for the public sector and nonresidential,” noted analysts at Econoday.

“The first likely is being supported by low mortgage rates and low supply. The latter two are likely being held back by fiscal issues of the federal government and revenue shortfalls at the state and local government level,” Econoday added.

So what is behind what seems to be a rollercoaster ride for homebuilders right now?

“A lot of builders are not building (or not building as much),” suggested Christopher Tower, assurance partner in BDO USA’s real estate practice during an interview with HousingWire.

“Homebuilders are only building in small patches for current available demand. I think that is why homebuilding permits are low.”

Tower noted builders have become more sophisticated in their pricing structures, and it’s possible when rents continues to climb, builders will start to see a strong competitive advantage in building for new homeowners who find new construction prices competitive with market rents.

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