US Construction Spending, House Prices, Home Builder Shares

Private residential construction in the US got off to an auspicious start in 2017, continuing the growth trend that began in October of last year. National Associ- ation of Home Builders analysis of Census Construction Spending data released Wednesday shows that total private residential construction spending grew 0.5 per cent in January 2017 to a seasonally adjusted annual rate of US$476.4 billion.

Meanwhile, the S&P CoreLogic Case-Shiller US Home Price Indices for December were released Tuesday. The national index reached a new high for the month of December and 4Q, but trailed slightly in 2016 overall. The annual average in 2006 was 183.45, slightly ahead of 181.34 in 2016.

Elsewhere, the 2016 top ten publicly-traded builders captured a 27.4 per cent share of new single-family home closings, up from 25.6 per cent in 2015. The 27.4 per cent share in 2016 is out of the 559,000 new home sales reported by the Census Bureau Friday. However, this count represents a smaller share of the total single-family market when not-for-sale, custom home building is included.

US Residential Construction, House Prices, Home Builder Shares


Multifamily construction spending in the US for January grew by 2.2 per cent to a seasonally-adjusted annual rate of US$63.5 billion, more than double that of December.
The National Association of Home Builders construction spending index, released Wednesday, illustrates this four-year trend in home improvement spending as well as the growth in residential construction spending since 2000. Beginning in August 2010—when the indeces for single-family and multifamily spending converged—monthly growth of multifamily construction spending has doubled that of single-family spending, on average. During the same period, the month-over-month growth of spending on home improvements has averaged one-quarter that of spending on new multifamily construction.


The annual pace of US house price appreciation reaccel- erated to 5.2 per cent in 2016 after decelerating from a post-crash high of 9.6 per cent in 2013 to 4.6 per cent in 2015, said NAHB Monday. While the monthly numbers are volatile, the general trend in house prices has followed the rise in existing home sales since the downturn.

In fact, since 2012 the pace of growth in the CS nation- al home price index has been highly correlated with the pace of existing home sales in the prior two quarters. The strong price growth in 4Q reflects brisk sales in 2Q of the year, and a slowdown in 3Q sales points to a deceleration in house price appreciation in the current quarter, prob- ably not a bad thing after a bumpy ride through the last couple of years.


The top builder, D. R. Horton, jumped to a 7.2 per cent share of new home sales in 2016, up from a 2015 share of 5.7 per cent, according to the US Census Bureau Friday.

The companies’ fiscal years vary and do not perfect- ly align with calendar years, but the comparison was made against their prior year 10K filings for uniformi- ty. Comparing the top ten builders from 2010 through 2016, the top ten shares based on annual SEC 10Ks were, in order, 26.9 per cent, 24.3 per cent, 23.9 per cent, 25.3 per cent, 26.4 per cent, 25.6 per cent and 27.4 per cent.

Publicly-traded companies possess many advantages including better access to credit from their own bal- ance sheets, economies of scale in land and material purchases as well as in advertising and land holdings. However, small builders are better positioned to ad- dress the growth in and the knowledge of their local markets and their flexibility allows them to customize their product to meet local demands and preferenc- es. Also, small home building companies usually have their roots in the local market and can use those more personal relationships to improve quality and increase repeat business.