We are already seeing the results
of the $1.1T budget agreement, and $305 STIRR Surface Transportation and
Highway Trust Fund bill. Construction
spending rose a strong 1.5 percent in January due to a surge in highway &
street spending as well as gains for manufacturing and on Federal construction
projects.
This is incredible news, as it is
the first time that Repubs and Democrats agreed on federal spending since the
great sequester cut spending across the board in 2011. The result will be much needed repairs of our
almost century-old infrastructure.
Remember those Flint, Michigan lead drinking water pipes?
We may be finally turning the
corner on neglect of our public infrastructure, so held back by the austerity
policies of one political party. There was an impressive 33.9 percent gain for
highways & streets (mostly done by states), and a smaller 9.9 percent
increase in the Federal category.
And also in the private sector,
private nonresidential components, namely offices, had a 24.8 percent
year-on-year gain. This is another sign
of increased business investment.
But the housing sector also
benefited on the multi-family side, reflecting strength in rental prices. Year-on-year spending on rental housing is up
30.4 percent vs 6.6 percent for single-family homes. Together, residential
spending is up a huge year-on-year 7.7 percent.
The availability
of acquisition, development and construction (AD&C) loans has been a factor holding back a stronger rebound
in home construction until now, but easing credit conditions and a growing loan
base should help expand the residential building market.
According to the National
Association of Home Builders and FDIC analysis, the outstanding stock of 1-4
unit residential construction loans made by FDIC-insured institutions
rose by $2.6 billion during the fourth quarter of 2015, raising
the total stock of outstanding loans to $60.9 billion.
“On a
year-over-year basis, the stock of residential construction loans is up
18.9%, as indicated by the red bars in the graph above. The current reading is
higher than the 16% to 17.5% annual growth rate range that the series had been
in for the prior year and a half, says the NAHB. “This change suggests
accelerating single-family building growth in 2016, which is consistent with
NAHB’s forecast. Since the first quarter
of 2013, the stock of outstanding home building construction
loans has grown by 49%, an increase of $20.1 billion.”
This is further evidence the
housing market is just beginning to recover.
Banks are finally lending again, and interest rates are at record lows,
with the 10-year TBond yield at 1.76 percent and 30-year conforming fixed rates
as low as 3.25 percent in California.
Harlan Green © 2016
Follow Harlan
Green on Twitter: https://twitter.com/HarlanGreen
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