Economy: Construction Spending Declines 7th Straight Month

[unlawflcombatnt]

Construction Spending for November declined again, for the 7th straight month. This is illustrate below in the bar graph from Briefing.com



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**The annualized rate of change in Construction Spending can be seen from the graph below:



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**The monthly changes can be seen in the table below from Briefing.com



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**The actual numbers can best be seen in the chart below from the U.S. Census Bureau. (Residential Construction numbers are underlined in red.)





Again, November marked the 7th straight month of Construction Spending declines. November's total annualized Construction Spending was $1.184139 trillion. This was a decline of $2.6 billion from October's $1.18671 trillion, or a change of -0.2%.

The Residential Construction Spending decline, however, was much larger. November's annualized Residential Construction declined almost $10 billion, from $607.5 billion to $597.797 billion, for a change of -1.6%. The year-over-year decline in residential construction is 11%. However, the annualized rate of decline over the last 4 months has been much larger. (Compare the 2 numbers that are double underlined in red.) Since July 2006, Residential Construction Spending has declined $38 billion, from $635.904 billion in July to 597.797 billion in November, for a 4 month change of -6.0%. If this 4-month rate of decline continued for an entire year, the year-over-year decline would be $114 billion, or a change of -18%. At this rate, it would reduce our GDP by almost 1%. The loss of construction jobs, and the income they provide, would cause an even larger decline in GDP. Add to this the decline in spending financed by home equity extraction (expected to decline by at least $120 billion), and there will be an even larger decline in GDP.

unlawflcombatnt

Economic Populist Forum

EconomicPopulistCommentary

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The economy needs balance between the "means of production" & "means of consumption."

[Warpy]

1. Housing has been OVERBUILT to satisfy speculators

Wait until we despised boomers start to kick off.

There will be a true housing glut.

[Calhoon2007]

2. Pretty sure we are experiencing a real glut right now.

So, you better stick around.

[unlawflcombatnt]

5. Exactly

When all the speculators try to reduce their own "personal" inventory to 1 home, it's going to throw still more homes on the market. In fact, this has already started, but it hasn't gone into full speed yet. There are still a lot of people out there who own 2 (or more) homes. As those additional homes go down in value, many will try to sell, further increasing the number of homes on the market.

[unlawflcombatnt]

3. Correction: Construction Spending Dropped for 8th striaight month

I want to correct my original post. Construction Spending has dropped for the 8th straight month. (Not 7 straight as I initially posted.)

[PsycheCC]

4. Thanks for the charts!

I sure appreciate you running the numbers for us, and I for one, hope prices in California do drop some so I can afford to buy a house. The last few years have been pretty crazy here, with many people buying more than one home as investments. This frenzy of buying has, of course, just contributed to the fast rise in prices.

[kineneb]

6. lotsa' empty new houses 'round here

Reporting from scenic, rural Lake Co.

The speculation boom got here a little later than in most of CA. However, there sure seems to be a lot of new homes for sale, and no buyers in sight. Been seein' some 'a them "reduced" signs out there, too. The RE people here say that they are still selling, but I bet the properties are either high end or the dumpy (and affordable) fixers. Given that it is winter, and construction always tapers off, but I just don't think there will be much building come the dry season. And yet, there are still developers talking about putting in "gated communities" with golf courses. (Gad, what snots. The deer and turkeys don't give a damn about their fancy "gates.")

I think we have seen the end of the "commuter" market here after the $3.00 gas last summer. No one can afford to buy in the boonies and then commute 1-1/2 hours each way to Santa Rosa and the Hwy. 101 corridor. (We are talking two-lane mountain roads, not freeways.) And everyone has figured out that gas prices will go back up.

[unlawflcombatnt]

7. New Homes

They've put up dozens of large new homes down the street from the apartments I live in. I don't know how they're selling, but I suspect the prices are less than previously. Homes put up the previous year right across the street are still on the market. These were huge homes with almost no yard, initially going for $600-$650,000. Prices tend to be declining slightly in Orange County (CA) at present. There are at least 2 completely un-lived in homes within 1 block of me (that I know of.)

I think the decline will accelerate over the next couple of years. Foreclosures are reportedly double what they were in the previous quarter in Southern California. Everything still indicates the supply is increasing faster than the demand.

The housing market still has a long ways to drop before it "bottoms out," despite what the real estate propagandists are saying.

[fuzzyball]

9. The smallest downturn previously was 22 months...

and ther ehave been aprox 10 or 12 in the last 60 years.
The current slowdown is 11 months old, so it has more to
go based on history. My feeling is it will be longer because
of the more extensive leverage present in the current situation.

[fuzzyball]

8. My next door neighbor makes great living teaching others how to

buy residential properties and flip them for quick profit.
I don't wish him bad fortune but it will be interesting to
see how the housing collapse affects his business. Don't
worry he is worth a few millions already and wont starve.