Homebuilders are spending a record amount to build single-family houses but because of inflation that is not helping to address the shortage of homes.
Private sector outlays for the construction of single-family homes rose 1.8 percent in June compared with a month earlier, an acceleration of spending from the one percent growth in April and 1.1 percent growth in May, data from the Census Bureau showed Monday.
But instead of being a sign of more building—much needed as home prices soar and housing shortages squeeze markets across the country—the largest part of the increased spending is likely just a reflection of rising costs. The Bureau of Labor Statistics said that the prices of goods purchased for residential construction rose 2.9 percent in June compared with the month prior, which would be an all-time record if May had not been even higher at four percent. Prior to June of 2020, the goods index had never jumped more than two percent in a single month.
On an annual basis, the costs are up 23.8 percent, reflecting in part the big deflation seen during the months after the pandemic struck last year. That is a record high but is considered a distortion due to the pandemic effects.
The index for the cost of services used in residential construction rose 6.3 percent in June, the biggest ever monthly jump.
These massive increases in costs are more than enough to devour the gain in single-family home construction.
Overall construction outlays—which include private and public sector, residential and non-residential—rose a slight 0.1 percent, below Wall Street’s expectation for a 0.5 percent rise. Residential construction rose 1.1 percent, while spending on public construction projects fell 1.2 percent. Non-residential construction was down 0.7 percent.
Private sector, nonresidential construction spending fell for every category except education and communication, each of which inched up by one-tenth of a percent.