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June Private Residential Construction Spending Dips

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Private residential construction spending fell by 0.7% in June, marking the sixth straight month of decreases. This decline was primarily driven by reduced spending on single-family construction. Compared to a year ago, total spending was down 6.2%, as the housing sector continues to navigate the economic uncertainty stemming from ongoing tariff concerns and elevated mortgage rates. 

According to the latest U.S. Census Construction Spending data, single-family construction spending declined by 1.8% in June. This decrease aligns with the weak single-family starts in June and the third lowest reading of NAHB/Wells Fargo Housing Market Index (HMI) since 2012. Compared to a year ago, single-family construction spending decreased by 5.3%. Meanwhile, multifamily construction spending stayed flat for the month but continued to follow the downward trend that began in mid-2023. Compared to June 2024, multifamily spending was down 9.5%. Improvement spending (remodeling) was up 0.5% in June but was 6.1% lower on a year-over-year basis.  

The NAHB construction spending index is shown in the graph below. The index illustrates how   spending on single-family construction has slowed since early 2024 under the pressure of elevated interest rates and concerns over building material tariffs. Multifamily construction spending growth has also slowed down after the peak in July 2023. Additionally, improvement spending has been weakening since the beginning of 2025.

 

Meanwhile, spending on private nonresidential construction was down 4% over a year ago. The annual private nonresidential spending decrease was primarily driven by a $14.7 billion drop in the manufacturing category, followed by a $13.7 billion decrease in commercial construction spending.

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Residential Remodelers Outnumber Single-family Builders in the U.S.

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The number of residential remodelers in the U.S. has reached a record high of 128,187 establishments, 65% higher than the number of residential builders (single-family and multifamily), which stands at 77,455.  These official government counts were released by the U.S. Census Bureau as part of its 2022 Economic Census, which tallies American businesses every five years (in years ending in 2 and 7).

Growth in the number of remodelers significantly outpaced that of builders between 2017 and 2022. In that 5-year span, the remodeler count increased by 25% (102,818 to 128,187), while the number of builders grew at half that pace–by 12% (68,996 to 77,455).

A starker dichotomy emerges when comparing 2022 counts to those in 2007, prior to the financial crisis and the ensuing housing recession.  In that 15-year period, the official number of residential remodelers in the U.S. grew by 73% (73,888 to 128,187), while the official number of residential builders contracted by 21% (98,067 to 77,455).

Another way to analyze this data is by creating a combined universe of both builders and remodelers and then calculating each group’s share of the total. In 2022, for example, remodelers represented 62% of the total number of builders and remodelers in the U.S, while builders made up a minority share of 38%.  Remodelers have accounted for at least 60% of this total in the last three Economic Census (2012, 2017, and 2022). 

The last time builders comprised a majority share was in 2007, when they represented 57% of the combined total number of builders and remodelers in the country.

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May Private Residential Construction Spending Dips

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Private residential construction spending fell by 0.5% in May, marking the fifth straight month of decreases. This drop was primarily driven by reduced spending on single-family construction. Compared to a year ago, total spending was down 6.7%, as the housing sector continues to navigate the economic uncertainty stemming from ongoing tariff concerns and elevated mortgage rates.

According to the latest U.S. Census Construction Spending data, single-family construction spending declined by 1.8% in May. This decrease aligns with the third lowest reading of NAHB/Wells Fargo Housing Market Index (HMI) since 2012. Compared to a year ago, single-family construction spending decreased by 4.5%. Meanwhile, multifamily construction spending stayed flat for the month but continued to follow the downward trend that began in mid-2023. Compared to May 2024, multifamily spending was down 10.9%. Improvement spending (remodeling) was up 0.9% in May but was 7.8% lower on a year-over-year basis.

The NAHB construction spending index is shown in the graph below. The index illustrates how   spending on single-family construction has slowed since early 2024 under the pressure of elevated interest rates and concerns over building material tariffs. Multifamily construction spending growth has also slowed down after the peak in July 2023. Improvement spending has also been weakening since the beginning of 2025.

Spending on private nonresidential construction was down 3.9% over a year ago. The annual private nonresidential spending decrease was primarily driven by a $15 billion drop in commercial construction spending, followed by a $9.0 billion decrease in the manufacturing category.

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April Private Residential Construction Spending Dips

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Private residential construction spending fell by 0.9% in April, marking the third consecutive monthly decline. This decrease was primarily driven by reduced spending in single-family construction and home improvements. Compared to a year ago, total spending was down 4.8%, as the housing sector continues to navigate the economic uncertainty stemming from ongoing tariff concerns and elevated mortgage rates.

According to the latest U.S. Census Construction Spending data, single-family construction spending declined by 1.1% in April. This decrease aligns with the weakness in the April single-family starts and NAHB/Wells Fargo Housing Market Index (HMI). The April data ends seven months of growth in single-family construction spending, making it 2.2% lower than a year ago. Meanwhile improvement spending was down 0.8% in April and was 5.5% lower on a year-over-year basis. Multifamily construction spending edged down 0.1% in April, staying in the downward trend that began in December 2023. Compared to April 2024, multifamily spending was down 11.3%.

The NAHB construction spending index is shown in the graph below. The index illustrates how   spending on single-family construction has slowed since early 2024 under the pressure of elevated interest rates and concerns over building material tariffs. Multifamily construction spending growth has also slowed down after the peak in July 2023. Improvement spending has also been weakening since the beginning of 2025.

Spending on private nonresidential construction was up 1% over a year ago. The annual private nonresidential spending increase was mainly due to higher spending for the class of power ($7.9 billion), followed by the office category ($3.3 billion).

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Residential Mortgages Experience Weaker Demand in First Quarter

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Overall demand for residential mortgages was weaker while lending standards for most types of residential mortgages were essentially unchanged according to the Federal Reserve Board’s April 2025 Senior Loan Officer Opinion Survey (SLOOS).  For commercial real estate (CRE) loans, lending standards for construction & development were moderately tighter, while demand was modestly weaker.  However, for multifamily loans within the CRE category, lending conditions and demand were essentially unchanged for the second consecutive quarter. 

The Federal Reserve left its monetary policy stance (i.e., Federal Funds rate) unchanged during its most recent meeting stating that the Fed “is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.”  Nevertheless, NAHB is maintaining its forecast for interest rate cuts in the second half of 2025.

Residential Mortgages

In the first quarter of 2025, only one of seven residential mortgage loan categories saw a slight easing in lending conditions, as evidenced by a positive value for GSE-eligible loans, which was +3.2 in the first quarter of 2025.  Subprime and government loans both recorded a neutral net easing index (i.e., 0) while the other four categories (Non-QM jumbo; Non-QM non-jumbo; QM non-jumbo, non-GSE-eligible; QM jumbo) were negative, representing tightening conditions.  The Federal Reserve classifies any net easing index between -5 and +5 as “essentially unchanged,” however.  By this definition, lending standards changed significantly for only one category of residential mortgages: non-QM jumbo (-7.5).

All residential mortgage loan categories reported significantly weaker demand in the first quarter of 2025, except for QM-jumbo which was essentially unchanged.  The net percentage of banks reporting stronger demand for most of the residential mortgage loan categories has been negative since mid-2022.

Commercial Real Estate (CRE) Loans

Across CRE loan categories, construction & development loans recorded a net easing index of -11.1 for the first quarter of 2025, indicating tightening of credit conditions.  For multifamily loans, the net easing index was -1.6, or essentially unchanged. Both categories of  CRE loans show at least three consecutive years of tightening lending conditions (i.e., net easing indexes below zero).  However, the tightening has become less pronounced recently—especially for multifamily, with its net easing index rising (i.e., becoming less negative) for six straight quarters.

The net percentage of banks reporting stronger demand was -6.3% for construction & development loans and -1.6% for multifamily loans, the negative numbers indicating weakening demand.  Like the trend for lending conditions, demand for CRE loans has become less negative recently, especially for multifamily loans  where the net percentage of banks reporting stronger demand has risen (i.e., become less negative) for six consecutive quarters.

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Residential Building Worker Wage Growth Slows Amid Softer Labor Market

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Wage growth for residential building workers continued to slow in March 2025, reflecting softening in the construction labor market, according to the latest report from the U.S. Bureau of Labor Statistics (BLS).

On a nominal basis, average hourly earnings (AHE) for residential building workers reached $38.76 in March 2025, up 4.5% from $37.10 a year ago. This marks a continued deceleration in the year-over-year wage growth, which peaked at 9.3% in June 2024. The recent slowdown reflects an easing of pandemic-related labor shortages and a softening labor demand in the construction sector. In March, the construction labor market saw a decline in job openings as employers slowed hiring plans amid ongoing economic uncertainty.

Despite the slowdown in wage growth, residential building workers’ wages remain competitive:

10.2% higher than the manufacturing sector ($35.17/hour)

24.0% higher than the transportation and warehousing sector ($31.25/hour)

3.7% lower than the mining and logging sector ($40.23/hour)

Note:

Data used in this post relate to all employees in the residential building industry. This group includes both new single-family housing construction (excluding for-sale builders) and residential remodelers but does not include specialty trade contractors.

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March Private Residential Construction Spending Dips

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Private residential construction spending declined by 0.4% in March, largely driven by a decrease in home improvement spending. This decline followed five consecutive months of growth. Despite the monthly drop, spending remained 2.8% higher than a year ago, showing the resilience of the housing market.

According to the latest U.S Census Construction Spending data, improvement spending declined by 1.2% in March, aligned with the weakness in the Remodeling Market Sentiment of the first quarter of 2025. Still, spending on improvements was 13.4% higher than in March of 2024. Meanwhile, spending on single-family construction edged up by 0.1% in March, continuing its growth after a five-month decline from April to August 2024. However, single-family construction spending remained 0.8% lower than a year ago. Multifamily construction spending stayed unchanged in March, staying in the downward trends that began in December 2023. Compared to March 2024, it was down 12.1%.

The NAHB construction spending index is shown in the graph below. The index illustrates how   spending on single-family construction has slowed since early 2024 under the pressure of elevated interest rates and concerns over building material tariffs. Multifamily construction spending growth has also slowed down after the peak in July 2023. Meanwhile, improvement spending has increased its pace since late 2023.

Spending on private nonresidential construction was up 1.6% over a year ago. The annual private nonresidential spending increase was mainly due to higher spending for the class of power ($8.7 billion), followed by the manufacturing category ($8.1 billion).

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Private Residential Construction Spending Rises in February

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Private residential construction spending increased by 1.3% in February, rebounding from a 1.2% dip in January. The growth was largely driven by higher spending on single-family construction and residential improvements. On a year-over-year basis, the February report showed a 1.6% gain, indicating a modest growth in private residential construction spending during market uncertainties. 

The monthly increase in total private construction spending was primarily driven by gains in spending on single-family construction and residential improvements. Single-family construction spending was up 1% for the month, continuing to grow after a five-month decline from April to August 2024. This growth is consistent with strong single-family housing starts in February. However, single-family construction spending remained 0.1% lower than a year ago. Meanwhile, improvement spending rose by 2% in February and was 8.9% higher compared to the same period last year. In contrast, multifamily construction spending stayed flat in February, extending the downward trend that began in December 2023. Compared to a year ago, multifamily construction spending was down 11.6%. 

The NAHB construction spending index is shown in the graph below. The index illustrates how   spending on single-family construction has slowed since early 2024 under the pressure of elevated interest rates and concerns over building material tariffs. Multifamily construction spending growth has also slowed down after the peak in July 2023. Meanwhile, improvement spending has increased its pace since late 2023.  

Spending on private nonresidential construction was up 2.5% over a year ago. The annual private nonresidential spending increase was mainly due to higher spending for the class of manufacturing ($10.5 billion), followed by the power category ($6.4 billion). 

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Volume of Residential Construction Loans Falls in Q4 2024

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Higher interest rates and tight financial lending conditions have led to a decline in loans for new home construction. The total volume of acquisition, development, and construction (AD&C) loans outstanding from FDIC-insured institutions fell 1.02% to $490.7 billion, the third straight quarterly decline. The level of 1-4 residential construction loans, which include loans for the construction of single-family homes and townhomes, has fallen for seven consecutive quarters. Coincidingly, the volume of 1-4 family residential construction has moved to its lowest level since 2021.

The volume of 1-4 family residential construction and land development loans totaled $89.5 billion in the fourth quarter, down 7.6% from one year ago. This is also down after reaching a recent high of $105.0 billion in the first quarter of 2023.

To end the year, a plurality of outstanding loans was held by smaller banking institutions, those with $1 billion-$10 billion in total assets, totaling $30.2 billion (33.7%). Banks with $10 billion- $250 billion in assets held the second largest share at $29.8 billion (33.3%), followed by the smallest banks with under $1 billion in assets, holding $20.7 billion (23.1%). The largest banks with over $250 billion in assets held the smallest amount at $8.8 billion (9.8%).

Notably, 56.9% of 1-4 family residential construction and development loans were held by banks with under $10 billion in assets to end 2024. Small community banks play a vital role ensuring financial and lending opportunities for builders across the United States. The data below shows the year-ending level of outstanding 1-4 family residential construction loans broken out by bank asset sizes.

All Other Real Estate Development Loans

Excluding 1-4 family residential construction loans, the level of all other outstanding real estate construction loans totaled $394.6 billion and was down 2.2% from the previous year This is also down from a peak in the second quarter of 2024 of $404.2 billion.

The banks that held the most loans were those with total assets between $10-$250 billion totaling $163.2 billion (41.4%) to end 2024. Banks with $1-$10 billion in assets held $107.1 billion (27.3%), banks with more than $250 billion in assets held $86.6 billion (21.9%) and the smallest banks, those with less than $1 billion in assets, held $37.7 billion (9.6%).

For the end of 2024, larger banks ($10 billion or more in assets) had more activity in the other construction and land development loan arena compared to 1-4 family residential construction holding 63.3% of the outstanding volume.

It is worth noting, the FDIC data represent only the stock of loans, not changes in the underlying flows, so it is an imperfect data source. Nonetheless, lending remains much reduced from years past. The current amount of existing 1-4 family residential AD&C loans now stands 56% lower than the peak level of residential construction lending of $204 billion reached during the first quarter of 2008. Alternative sources of financing, including equity partners, have supplemented this capital market in recent years.

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January Private Residential Construction Spending Dips

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Private residential construction spending declined by 0.4% in January, largely driven by a decrease in multifamily construction and home improvement spending. This decline followed three consecutive months of growth, indicating a downward shift in the monthly data.  Despite the monthly drop, spending remains 3.1% higher than a year ago, showing the resilience of the housing market.

  According to the latest U.S Census Construction Spending data, multifamily construction spending fell by 0.7% for the month, extending the downward trends that began in December 2023. This decline aligns with the weakness in the Multifamily Production Index (MPI) and a lower number of multifamily homes under construction. Improvement spending declined by 1.5% in January but was 14.3% higher compared to the same period last year. Meanwhile, spending on single-family construction rose by 0.6% in January, continuing its growth after a  five-month decline from April to August. This growth also aligns with steady builder confidence seen in the Housing Market Index. However, single-family construction remained 0.9% lower than a year ago.

The NAHB construction spending index is shown in the graph below. The index illustrates how   spending on single-family construction has slowed since early 2024 under the pressure of elevated interest rates and concerns over building material tariffs. Multifamily construction spending growth has also slowed down after the peak in July 2023. Meanwhile, improvement spending has increased its pace since late 2023.

Spending on private nonresidential construction was up 1.8% over a year ago. The annual private nonresidential spending increase was mainly due to higher spending for the class of manufacturing ($12.4 billion), followed by the power category ($5.5 billion).

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