Aug. 1 (Bloomberg) -- Construction spending in the U.S. increased in June to the highest level in almost three years as the housing market continued to stabilize.
The 0.4 percent gain, which matched the median forecast of economists surveyed by Bloomberg News, pushed the value of all projects up to $842 billion at an annual rate, the most since November 2009, Commerce Department figures showed today in Washington. The advance in May was revised to 1.6 percent from an initially reported 0.9 percent rise.
A sustained housing recovery is supporting the construction sector even as public spending languished. Home builders such as Standard Pacific Corp. are buoyed by a need for inventories and improvement in lending standards for buyers.
“Starts and permits are up, supply is tight, there’s pent-up demand out there, credit is slowly getting better,” Gus Faucher, a senior economist at PNC Financial Services Group Inc. in Pittsburgh, said before the report. “There’s definitely a rebound on the residential side, there may be a rebound on the commercial side.”
Estimates of the 47 economists surveyed ranged from an increase of 1 percent to a decline of 0.2 percent.
Construction spending increased 9 percent in the 12 months ended in June, before adjusting for seasonal variations.
Private construction spending increased 0.7 percent in June from the prior month.
Homebuilding outlays rose 1.3 percent, bringing its value to $266 billion, the highest level since January 2009. The category grew even as home improvement spending dropped 0.8 percent. Private non-residential projects climbed 0.1 percent.
Spending on public construction was little changed in June from the prior month as federal projects dropped by 1.6 percent. Expenditures by state and local government agencies climbed 0.2 percent.
Housing demand has shown a choppy recovery. Demand for new U.S. homes unexpectedly dropped 8.4 percent in June from a two-year high the previous month, and those of existing homes declined 5.4 percent to an eight-month low, figures showed last month.
Housing starts climbed 6.9 percent to a 760,000 annual pace in June, the fastest rate in almost four years, from a revised 711,000 rate in the prior month, according to Commerce Department figures released on July 18.
“We have always maintained that the housing recovery would likely be an uneven one,” Scott Stowell, Standard Pacific president and chief executive officer, said on a July 27 earnings call. “New housing starts and permits are up significantly from last year, albeit at levels that are still well below normal.”
Borrowing costs remain attractive. The average rate for a 30-year fixed mortgage dropped to 3.49 percent in the week ended July 26, the lowest in Freddie Mac records dating to 1971. The average 15-year rate dropped to 2.8 percent, also a record, from 2.83 percent, the McLean, Virginia-based mortgage-finance company said in a statement.
Construction funded by government agencies is likely to continue to face headwinds. Communities and states across the nation endure soaring costs for pensions and retiree health benefits as sales and property-tax revenue have fallen from the longest recession since the 1930s.
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