Home Remodeling Activity Picks Up

June 2, 2011

Construction spending in April posted its biggest gain in six months — getting a boost by spending on home remodeling.

While overall construction spending increased only slightly by 0.4 percent in April, the increase in spending on home improvements helped offset some drops in single-family homes and apartment construction, the Commerce Department reported Wednesday.

Construction spending for residential homes increased 3.1 percent in April mostly due to the uptick in home remodeling, the Commerce Department noted. Instead of buying a new home, more people seem to be opting to remodel their existing home. The National Association of Home Builders recently reportedthat the home remodeling industry saw some of its biggest gains in more than four years. NAHB’s remodeling index recently reached its highest level since the fourth quarter of 2006.

Meanwhile, construction of single-family homes dropped 1 percent in April, the Commerce Department noted. On the other hand, nonresidential construction increased slightly by 0.4 percent for the month, with the increase mostly attributed to a rise in spending on health care, schools, and power plants.

Overall spending on construction projects in April remains far below the $1.5 trillion annual amount that economists consider healthy for the sector. In April, construction projects totaled a seasonally adjusted annual rate of $765 billion — only slightly above the 11-year low reached in February of $761 billion.

"The overall story here is that housing is hugely depressed, but it has probably hit bottom," says Ian Shepherdson, chief U.S. economist at High Frequency Economics.

Source: “Builders Began More Remodeling Projects in April, But Construction Spending Near 11-Year Low,”Associated Press (June 1, 2011) and “Renovations Lift U.S. April Construction Spending,”Reuters News (June 1, 2011)

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