Residential Construction Spending Showed Varied Activity In June

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The Federal Savings Bank shares news of what it found intriguing regarding the recent construction spending report.

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If this forecasted growth is realized, home buyers can look forward to more new properties on the market in the second half of the year.

The recent construction spending report for the residential sector in June has given lenders like The Federal Savings Bank a mixed sentiment of the housing market. The sector posted a combination of declines and gains between the month-over-month and year-over-year comparisons, respectively.

According to the U.S. Census Bureau, total spending for residential construction was at $361.3 billion in June, down 0.2 percent from $362.1 billion in May. Compared to June 2013, there was a 7.1 percent rise from $337.5 billion.

In the private sector, residential spending dropped from $357 billion in May to $355.9 billion in June, a 0.3 percent decline. Year over year, there was a 7.4 percent increase from $331.3 billion. In the new single-family market specifically, there was a 1.4 percent drop month over month, with spending falling from $186.8 billion in May to $184.2 billion in June. Compared to $169.8 billion in June 2013, there was an 8.5 percent gain. The new multifamily market had growth for both comparisons in June, rising 2.5 percent and 33.2 percent month-over-month and year over year, respectively, to $41.8 billion.

Residential construction spending in the public sector was at $5.4 billion in June. There was a 6.3 percent increase compared to May but a 12.3 percent decline from the previous year.

Economists' expectations weren't met
The Wall Street Journal reported on August 1st that June's construction spending data was weaker than what some industry analysts had predicted. Economists surveyed by the Journal anticipated a 0.4 percent gain for total spending, which fell 1.8 percent between May and June, marking the biggest decline since January 2011. This decrease resulted in slow private construction, which contributes 70 percent to overall spending. Within this sector, weak home building was among the causes that led to the slower pace of spending.

While the Census data does not provide the most positive outlook for new home inventory, Bloomberg Businessweek also reported on August 1st that its economists expect renewed momentum in the coming months, which in turn, will boost the economy. These predictions come on the heels of 4 percent annual growth for gross domestic product in the second quarter of 2014, which is partially the result of gains in residential construction.

If this forecasted growth is realized, home buyers can look forward to more new properties on the market in the second half of the year.

Contact the Federal Savings Bank, a veteran owned bank, for information about a low cost mortgage that can help you remain competitive in the housing market when construction is slow and inventory is tight.

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Giorgio Urbano Ferrero
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