In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses construction spending.
- The housing market recovery is clearly having a positive impact on the economy. A modest commercial real estate rebound is also positively contributing to the economy.
- According to today’s data, construction spending squeaked out a small gain in June and is now 7 percent higher compared to one year ago. Residential construction (up 10.7 percent) is doing better than commercial construction (5.4 percent). Due to tight budgetary conditions at all levels of government, public construction spending was 3.7 percent lower from one year ago.
- In examining various subcomponents, private multifamily construction (not public multifamily) has zoomed up with an impressive 49 percent gain, though admittedly from very low levels. Both hotel/lodging and manufacturing plant construction made nice gains of 20 percent or better. Educational facilities by private schools and universities have been rising while spending for public school buildings has been falling. Spending for church and other religious buildings has been on a 10-year decline.
- Without the current housing market recovery, the U.S. economy would be teetering on a fresh recession with job losses. Fortunately, the U.S. will avoid a recession as long as the real estate market is permitted to recover without any hindrance. Namely, any new Washington policy rule that mandates a higher down payment to get a mortgage or tinkers with the mortgage interest deduction will quickly derail the housing market recovery.