In October, Construction spending increased slightly which was the first advance in six months, as a flow in Miami homes building offset continued weakness in construction that was not residential.
The slight increase is an optimistic sign that the key construction sector might be stabilizing, which could provide support for the fledgling economic recovery and a positive note for Miami real estate.
On Tuesday, the Commerce Department said that construction spending edged up 0.04% in October, or $401 million, pushing the seasonally adjusted annual rate to $910.8 billion. That was better than the 0.5% decline that was predicted, but it followed five straight drops including almost a 2% fall in September that was the largest since January.
The monthly construction report is often in question of revisions and the September drop originally was reported as an increase of 0.8%.
But the new report appears to signal that the construction sector is starting to stabilize, which would be good news for the economy, new Miami homes and Miami real estate in general, as it emerges from the worst percentage jump in residential construction, the largest advance in Miami homes building since March 1998. The increase pushed residential activity to a seasonally adjusted annual rate of $250.3 billion in October, still 23.6%below the year-ago level.
The surge in October in part reflected a rush by builders to get housing started before the expiration of a tax credit offered by the government to first-time homebuyers of up to $8,000 incentive that had been scheduled to expire on November 30. However, President Barack Obama earlier last month signed into law a measure that extends the tax credits for first-time buyers through June as long as they sign a binding contract by April 30. The program also was expanded to include a $6,500 credit for existing homeowners who buy a new place after living in their current residence for at least five years.
In October, nonresidential construction fell 2.5% making it the seventh consecutive decline, pushing activity down to an annual rate of $338.6 billion. That's 20.6% below the year-ago level as spending on office buildings, Miami Beach hotels and the category that includes shopping centers all showed weakness.
A credit squeeze is harming nonresidential construction as banks, struggling through the worst financial crisis since the 1930s, have tightened up loan standards due to soaring loan defaults in the commercial sector.
In October, spending on government construction dropped slightly by 0.4% to an annual rate of $321.8 billion. A 0.9% drop in spending on state and local government projects offset a 4.6% rise in federal spending.
In the July-September quarter, the overall economy expanded at an annual rate of 2.8% which was weaker than the 3.5% estimate. Still, it marked the first positive GDP growth following a record four consecutive quarterly declines.
Contributed by MLR Realty
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