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Home construction is booming, yet remains historically low

  • Blog Post by: Jim Buchta
  • June 7, 2013 - 9:32 AM

I've had a string of recent stories about boom times for Twin Cities-area builders, but as any builder, remodeler or subcontractor will tell you, things aren't what they used to be. There's a terrific analysis in the NYT that's puts the situation in context, following is an excerpt. You can see the full story by clicking here.

From the NYT's:

Home construction is booming in the United States, but it remains severely depressed.

That seemingly contradictory statement was illustrated by construction spending statistics issued this week by the Census Bureau. In April, spending on the construction of new houses and apartment buildings reached an annual rate of $195 billion.

As can be seen in the accompanying charts, spending on home building is up 40 percent over the last year. That is the largest such increase since the early 1980s. In the housing boom that preceded the Great Recession, such spending never rose more than 25 percent over a 12-month period. But that rate of spending is down more than 60 percent from the peak, reached in 2006, and is lower than spending as far back as 1997. The figures are not adjusted for inflation.

Were they so adjusted, the current level of spending would be even lower compared with the pace of building in past years. The charts are based on three-month averages of annual rates, in an effort to smooth out fluctuations caused by weather. Over all, total construction spending is running at an annual rate of about $861 billion, or 28 percent less than the 2006 peak.

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