U.S. construction spending fell 2.1% in May, though the level of homebuilding was above the year-ago level, according to a government report on Wednesday.
Combined homebuilding and nonresidential construction outlays totaled $1.36 trillion at a seasonally adjusted annualized rate, down from $1.39 trillion in April, the Census Bureau report said.
Residential construction fell 3.9% from April to $543.9 billion at an annualized pace. It was 1.1% above the year-ago month, the report said.
Low mortgage rates will boost residential construction in the second half of 2020 as families look for new homes after being cooped up during pandemic lockdowns, said Lawrence Yun, chief economist of the National Association of Realtors.
The average U.S. rate for a 30-year fixed mortgage was 3.13% last week, matching the all-time low set in the previous week, according to Freddie Mac.
“The outlook has significantly improved, as new home sales are expected to be higher this year than last, and annual existing-home sales are now projected to be down by less than 10% – even after missing the spring buying season due to the pandemic lockdown,” Yun said.
New-home sales probably will rise to a 13-year high of 690,000 this year, a 1% gain from 2019, he said in a forecast released on Monday. In 2021, builders likely will sell 800,000 new homes, the highest level since 2006, he said.
Sales of new houses jumped 16.6% in May as the cheap financing costs and a shortage of inventory boosted demand, the Census Bureau said last week.
Purchases of new single-family houses rose to 676,000 at a seasonally adjusted and annualized pace, the highest level since February, the month before the pandemic struck the U.S., according to a government report on Tuesday. The median price was $317,900, a gain of 1.7% from a year earlier.
About 27% of the homes sold in May were not yet started, 36% were under construction, and 37% were completed, according to the data that records a home as sold when it goes under contract.