Construction spending was up in March, but not as much as economists had projected, according to The U.S. Census Bureau (CB)
- Total construction spending was at 1,513 billion which is up 0.2% from the revised February estimate and 5.3% above the March 2020 estimate.
- Residential construction spending was up 1.7% from the revised February estimate and up 23.3% from the same time last year.
Not surprisingly, the biggest gainer was single-family housing construction. Spending was up 2.0% compared to last month and was up 26.7% from March 2020.
A MISS: Unfortunately, economists polled by The Wall Street Journal had expected a 1.8% gain. So even though we were in the green, expectations were rosier.
WHY IS THIS HAPPENING? Demand for houses has never been higher so why is construction failing to meet demand? Diana Olick at CNBC addressed the exploding costs of building a home… (CNBC)
- Skyrocketing lumber prices have added “$35,872 to the price of an average new single-family home”
- Lumber is not alone. “Prices of gypsum, which is drywall, are up nearly 7% from a year ago…And then there is land. The price per single lot is up 11% this year compared to last year…”
Builders can pass on most of the costs to the consumer and with housing prices skyrocketing that is clearly the case. However, there is a ceiling on home prices and the fewer costs builders can pass on the less likely builders are to build new homes.