Residential Building

Residential building in December edged up 2% to $144.4 billion (annual rate), the result of a 2% gain for single-family housing while multifamily housing held steady with its heightened amount of the previous month. After weakening during the first half of 2011, single-family housing during the second half of the year showed modest gains such that the rate in December was 9% above the average monthly pace for the prior year. Multifamily housing in December was helped by the start of several large projects, including $144 million for the multifamily portion of a mixed-use project in Washington, D.C., and $129 million for the multifamily portion of a mixed-use project in Boston.

The 2011 amount for residential building came in at $123.4 billion, up 2% from the previous year, and barely maintaining the upward momentum that began in 2010 with an 8% increase. Single-family housing in 2011 retreated 2% in dollar terms, following the 6% gain during 2010 that reflected the lift to housing demand coming from the homebuyer tax credits that year.

The regional pattern for single-family housing in 2011 showed declines in four of the five major regions—the Northeast, down 15%; the Midwest, down 5%; the West, down 2%; and the South Central, down 1%. The South Atlantic was the one region able to post a 2011 increase for single family housing, rising 2% in dollar terms. Multifamily housing in 2011 jumped 22%, continuing the upward trend that began in 2010 with an 18% increase. The regional pattern for multifamily housing in 2011 showed growth for all five major regions – the Midwest, up 5%; the South Central, up 14%; the Northeast, up 20%; the West, up 35%; and the South Atlantic, up 36%.

“The emerging if hesitant upturn for residential building is being led by multifamily housing this time, in contrast to previous cyclical upturns when single-family housing led the way,” Murray noted. “The momentum shown by multifamily housing in 2011 should continue during 2012, due to its favored status by the real estate finance community. Given the slight improvement over the course of 2011, single-family housing might also be able to see growth during 2012, although the level of activity will still remain quite weak compared to what was being reported for much of the previous decade.”

Non-Building Construction

Non-building construction in December dropped 10% to $122.9 billion (annual rate), continuing to slide back after the robust contracting reported during September and October. Electric utility construction in December plunged 50%, even with the start of several noteworthy projects—a $450-million power line project in Minnesota, a $232-million wind farm in Michigan, a $210-million wind farm in Washington state, and a $182-million gas-fired cogeneration plant in Michigan. The pace for new electric utility starts in December was the slowest for 2011, providing some indication that this category is now beginning to settle back after the exceptional activity reported for most of the year.

The public works categories in December generally showed some strengthening, with highway and bridge construction up 4%, water supply systems up 5%, sewers up 8%, and “miscellaneous public works” (which includes mass transit and site work) up 10%.

The miscellaneous public works category in December was supported by $514 million for work on the Number 7 Line subway-extension project in New York City. River/harbor development was the one public works category that retreated in December, slipping 2%.

For the full year 2011, non-building construction decreased 3% to $143.2 billion. The public works sector overall was down 15%, with declines across most categories. Highway and bridge construction dropped 6%, reflecting waning support from the federal stimulus act. The previous two years had seen expansion for highway and bridge construction, with 2009 up 8% and 2010 up 3%, as the result of the lift coming from the stimulus funds.

Sewer construction in 2011 retreated 3%, while water supply projects fell a more substantial 17%, due to diminished federal and state financing. The miscellaneous public works category in 2011 plummeted 44%, as the result of a sharply reduced amount of new pipeline starts. At the same time, river/harbor development projects in 2011 were able to hold steady with the previous year.

Running counter to the mostly weaker activity for public works in 2011 was a 46% surge for electric utility construction, which achieved a new annual high in current dollar terms. In particular, sharp expansion was reported for solar and wind power facilities, boosted by federal tax incentives that expired at the end of 2011.

The 2% decline for total construction starts at the national level during 2011 was the result of mixed behavior at the five-region level. Decreased activity for total construction was shown by three regions—the South Central, down 4%; the Midwest, down 9%; and the Northeast, down 12%.

Increased activity for total construction was reported for two regions—the South Atlantic and the West, each up 6%, with substantial gains for new electric utility starts helping the total construction amount for each region.