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December’s 2.1% Private Construction Rise Is the Largest Leap Since May

In a sign that the construction industry is stabilizing, construction spending rose in December at the highest pace in four months. This is a good sign for an industry that has shown only slow improvements since bottoming out in December of 2007.

Private construction numbers jumped, giving hope that although some construction may slow due to stymied federal spending, other contractors may have more work in 2012:

Private construction spending rose 2.1 percent in December from the prior month, the biggest gain since May. The increase brought the value up to $529.7 billion at an annual rate, the highest level since December 2009.

Homebuilding outlays increased 0.8 percent, including a 0.2 percent increase in home improvement. Non-residential building climbed 3.3 percent.

Spending on public construction advanced 0.5 percent, the report said. Federal construction spending increased 0.3 percent.

The homebuilding industry is trying to recover from record- low traffic last year. About 302,000 new homes were sold in the U.S. in 2011, the worst year in data dating to 1963, Commerce Department figures showed Jan. 26.

Housing starts are also up as builders broke ground on 470,000 new single family housing units in December, the most since April of 2010. This acts as a predictor that housing will regain it’s footing in 2012:

Home sales and construction will improve in 2012, adding “modestly” to economic growth, according to a Fannie Mae forecast last month. Sales of new and existing homes are likely to increase 3.5 percent, and housing starts are projected to rise 16 percent, the group’s chief economist said Jan. 13.

Homebuilder sentiment has also ticked up. The National Association of Home Builders/Wells Fargo sentiment index rose in January to the highest level since June 2007 as sales and buyer traffic improved.

“Although macroeconomic and housing conditions remain soft, we are cautiously optimistic for the remainder for 2012,” Donald Tomnitz, chief executive officer of Fort Worth, Texas-based D.R. Horton Inc., said in a Jan. 27 conference call. “Simply put, our business feels more positive.”

The largest U.S homebuilder by volume reported net home orders that rose to 3,794 in final three months of 2011 from 3,363 a year earlier.


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