Spending on construction of new residential housing and improvements to existing homes is at a three-year high.
Private-residential fixed investment, which includes major replacements such as new roofs and improvements such as finishing a basement, rose 9.1 percent from a year earlier to an annualized $360.7 billion for the three months ended March 31. This marks the fourth consecutive quarter of nominal increases and was the fastest pace of yearly growth since 2006, federal data show.
These expenditures may prolong a structure's life or increase its value and are "another piece of corroborating evidence" that home-related purchases were "very good" in the first quarter, said Scot Ciccarelli, a New York-based analyst at RBC Capital Markets.
New U.S. homes sold at a 328,000 annual rate in March. The total was down from an upwardly revised 353,000 pace the previous month that was the highest in two years.
Residential building permits also climbed by 4.5 percent to a 747,000 annual rate in March, the highest since September 2008.
Private-residential spending -- which accounts for about 2.3 percent of gross domestic product -- is highly correlated with comparable-store sales for Home Depot Inc. and Lowe's Cos., the largest U.S. home-improvement retailers.
Same-store sales probably rose at least 5 percent in the fiscal first quarter at Home Depot and at least 2.4 percent at Lowe's from a year earlier, Ciccarelli said.
As the housing industry shows signs of a comeback, the Standard & Poor's 500 Home Improvement Retail Index, composed of Home Depot and Lowe's, has risen 73 percent since Aug. 10, 2011.
