Spending on U.S. construction fell 0.8% in May, the first drop in six months, as home building fell for a fifth straight month.
Spending on all construction projects fell to a seasonally adjusted annual rate of $1.29 trillion from the revised April estimate of $1.30 trillion, the U.S. Census Bureau said. May’s spending was 2.3% below the May 2018 estimate of $1.32 billion.
Spending on private construction was at a seasonally adjusted annual rate of $953.2 billion, 0.7% below the revised April estimate of $960.3 billion, and 6.3% below a year ago.
Of that, residential construction spending was at a seasonally adjusted annual rate of $498.9 billion in May, which is 0.6% below the revised April estimate of $501.7 billion and 11% down from a year ago.
May’s Housing Market Index indicated that both inventory and affordability concerns continue to be major hurdles for the nation’s homebuilders.
“Builders are busy catching up after a wet winter and many characterize sales as solid, driven by improved demand and ongoing low overall supply,” NAHB Chairman Greg Ugalde said. “However, affordability challenges persist and remain a big impediment to stronger sales.”
Despite these concerns, the index measuring current sales conditions rose from 69 to 72 points, while buyer traffic increased from 47 to 49 points. Lastly, expectations over the next six months rose from 71 to 72 points.
“Mortgage rates are hovering just above 4% following a challenging fourth quarter of 2018 when they peaked near 5%. This lower-interest rate environment, along with ongoing job growth and rising wages, is contributing to a gradual improvement in the marketplace,” NAHB Chief Economist Robert Dietz said. “At the same time, builders continue to deal with ongoing labor and lot shortages and rising material costs that are holding back supply and harming affordability.”