Construction Spending Fell in July 2012 to $834.39 Billion
Construction spending dropped in both the public and private sectors in July, according to recent data released by the U.S. Census Bureau. The numbers are still higher than a year ago, but they appear to be dropping off on a month-over-month basis.
Total construction spending came to $834.39 billion in July 2012 compared to $842.22 billion in June 2012 and $763.47 in July 2011. This represents a decrease of 0.9 percent from the revised June estimate and a 9.3 percent increase from the estimate in July 2011.
A recent article from Mortgage News Daily reported overall construction spending, both public and private was down 0.9 percent month-over-month but up 9.3 percent the same period in 2011.
Total private construction was at an annual rate of 558.71 billion, down from 565.57 billion (-1.2 percent) in June but 15.0 percent higher than the rate of $485.79 billion one year earlier. Public construction was down 0.4 percent from June and 0.7 percent a year earlier to a seasonally adjusted annual rate of $275.67 billion.
Residential construction spending was at a seasonally adjusted annual rate of $271.21 billion in July, down from $275.52 billion in June and $230.60 billion in July 2011. Out of this category, private construction slipped from $268.85 billion in June to $264.62 in July. The cause for the decrease is unclear, as spending on single-family and multi-family housing actually rose in July. Single-family construction rose to $127.45 billion from $125.63 billion and multi-family construction spending also saw a slight increase from $21.37 billion to $21.96 billion.
It should be noted that residential construction represents only a small portion of public construction spending, which may help account for the conflicting trends. As the market continues to improve, we may be seeing more spending on residential construction, but in the meantime, it would appear that home buyers are choosing existing homes over newly built properties.
Mortgage Application Volume Continues to Drop Despite Falling Mortgage Rates
Mortgage applications fell another 3 percent since the week ending August 24th. The Market Composite Index, which measures application volume on an unadjusted basis, was down for the 5th straight week, according to the Mortgage Bankers Association. In spite of the current low rates and incentive programs, the Refinancing Index also dropped by 3 percent during the same period.
Jann Swanson of Mortgage News Daily reported in a September 5th news article that both indexes have seen a solid drop since the week ending July 27th. Refinancing applications have not been at such a low level since May. Of the current volume of mortgage applications, those for refinancing comprised 79 percent of the total. In late July, that figure was 81 percent.
Another home sales indicator was also down – the Purchase Index experienced a 0.8 decline on a seasonally adjusted basis. For the unadjusted Purchase Index, volume was 3 percent lower from the previous cycle, yet y-o-y, it was up by 1 percent.
What is interesting about these figures is that interest rates continued to go down during that period. It would certainly seem that more attentive home buyers would be taking advantage of that fact. For example, the average rate for a 30-year fixed rate mortgage changed from 3.80 percent to 3.78. For a jumbo fixed rate mortgage, the rate was down one basis point to 4.05 percent. The points went from 0.34 to 0.32. FHA backed 30-year fixed rate mortgage rates also saw a decrease, from 3.60 percent with 0.48 of a point to 3.54 percent with 0.44 points.
Market watchers can only speculate as to why mortgage applications are down. Could it be that the back to school season is keeping prospective home buyers too busy, or are they taking a wait and see stance, due to the upcoming Presidential election? These will be interesting figures to watch!