Residential Construction Spending on the Rise

December 22, 2012

chicago new homes construction

As a result of the housing market recovery, private residential construction spending is increasing. Residential construction spending rose 3 percent in October, and construction is at its highest dollar value since 2008, according to the National Association of Home Builders.

Construction of new single-family homes is experiencing solid growth at a rate of 3.6 percent on a month-to-month basis. Multifamily construction is also on the mend, and has increased more than 82 percent from its post-recession low.

In addition to new construction starts, home improvement activity is rising and increased by 1.8 percent in October. Even better news is that remodeling spending has reached its highest level in five years! Homeowner spending on remodeling is expected to grow from its current annual rate of $115.1 billion to $134.2 billion by the second quarter of 2013.

So, what’s the reason behind the high construction and remodeling rates? As the economy stabilizes, so does the housing market. Job creation plus steady GDP growth leads to “household balance sheet repair,” and when a household experiences “sheet repair,” it means that homeowner mortgage debt has lessened significantly. According to the Federal Reserve Bank of New York, household debt decreased by $74 billion in the second quarter of 2012.

Lower consumer debt and higher rates of construction will certainly impact the market for real estate in Chicago in a positive way. The decrease in consumer debt can help stimulate the economy in general, and provide homeowners with the freedom to spend more money on remodeling and interior design projects.

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