Northwest Arkansas Democrat-Gazette
Construction spending rises 1.8%
Home-building, government projects lead way in January
WASHINGTON — Spending on U.S. construction projects rose to an all-time high in January, helped by strong gains for home construction and government building projects.
The Commerce Department said Monday that construction spending increased 1.8% in January, the strongest monthly rise in nearly two years, pushing total spending to a record seasonally adjusted annual rate of $1.37 trillion.
Spending on home construction jumped 2.1%, the strongest gain since August. The strength came from single-family home construction, which rose 2.7%, while apartment building was unchanged.
Home-building has been seeing strong gains since the summer as falling mortgage rates have helped to spur a rebound after more than a year of lagging activity.
Nonresidential construction was up 0.8% in January with spending in the category that includes shopping centers and religious centers showing some of the biggest gains.
Spending on government building projects increased 2.6%, with spending by state and local governments rising 2% to an all-time high while spending by the federal government was up 9.9% to the highest level since May 2012.
After six quarters of declining activity in housing, residential construction has grown at solid rates for the past two quarters, with economists expecting that growth to continue this year.
The overall economy grew at a moderate 2.1% annual rate in the final three months of last year, but analysts are
concerned that the spreading coronavirus will depress U.S. growth in the first part of this year because of disruptions to supply chains and cancellations of public events.
Federal Reserve Chairman Jerome Powell said in a statement Friday that the Fed would be prepared to act to support economic growth if needed.
The stock market last week suffered its worst week since the 2008 financial crisis as fears rose about how bad the economic hit will be from the virus.
Stock indexes jumped sharply higher on Monday as investors grew optimistic that the Fed and other central banks would soon intervene and limit the coronavirus’s economic impact.
The Commerce Department reported last week that sales of new homes jumped 7.9% in January to the fastest pace in more than 12 years.
The report said new homes sold at a seasonally adjusted annual rate of 764,000. That’s the highest sales rate since July 2007, shortly before the U.S. economy slumped into the recession.
Half of January’s sales gains came from people buying homes that have yet to be constructed, possible evidence that low mortgage rates may be driving their decisions to purchase. Borrowing costs for home loans have tumbled since 2018.
But a shortage of properties on the market means that prices are also rising quickly.
The median price of a new home surged 14% from a year ago to $348,200.
U.S. long-term mortgage rates fell last week as growing concern over the economic fallout from the coronavirus outbreak spurred a steep downturn in global stock markets.
Mortgage buyer Freddie Mac — the Federal Home Loan Mortgage Corp. — said the average rate for a 30-year fixed-rate mortgage fell to 3.45% from 3.49%.
Rates are far below yearago levels: The benchmark 30-year loan averaged 4.35% a year ago.
The average rate on a 15-year fixed mortgage slipped to 2.95% from 2.99% the previous week.
The slide in stock prices pushed investors to buy up U.S. Treasury securities, viewed as a safe haven in the event of an economic downturn.
The investor move pushed the yield on the 10-year Treasury note sharply lower. It marked a record low of 1.28% Thursday morning. Long-term mortgage rates usually follow the yield on the 10-year note.
The decline in mortgage rates in recent months and the solid economy have pushed up demand for housing.
Americans signing contracts to buy homes jumped 5.2% in January from the previous month, the National Association of Realtors reported Thursday. Information for this article was contributed by Martin Crutsinger and Josh Boak of The Associated Press and by Vince Golle of Bloomberg News.