US Builders Cut Commercial Real Estate Projects to Focus on New Homes

Posted on 10 October, 2012 by Jodee Redmond

US builders spent more on new home construction in August, which was good news for those hoping for a rebound in the housing market. The increase did not offset the cuts in commercial real estate and public projects, however. Construction spending was down by 0.7 per cent that month from July, according to the Commerce Department. This pattern represented the second straight month of decline.

 

As a result, construction spending fell to a seasonally-adjusted rate of $834.4 billion, which is 12 per cent above the lowest point reached in February 2011. This number is also approximately half of the amount considered healthy for the industry.

In contrast, spending for residential properties rose by 0.9 per cent in August. That month’s returns pushed spending up to a seasonally adjusted rate of $273.5 billion. This figure is up nearly 18 per cent over the last year. Spending on single-family residences was up for the fifth straight month, and apartment construction figures increased for the 10th straight month.

Spending on commercial properties, such as shopping centers, office buildings, and hotels fell in August. Non-residential activity was lowered by 1.7 per cent to $288.7 billion, or 7.2 per cent higher than one year ago.

Government construction activity fell 0.8 per cent in August to an annual rate of $274.9 billion (seasonally adjusted). This figure is down 3.5 per cent from the previous year. State and local building activity was down by 0.9 per cent in August, and federal projects were up by 0.3 per cent.

The Federal Reserve is attempting to drive mortgage rates down to make buying a home more affordable and help the economy grow in the process. It plans to spend $40 billion per month to buy mortgage-backed securities until the job market improves.

 




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