The U.S. Census Bureau of the Department of Commerce announced that construction spending during October 2018 was estimated at a seasonally adjusted annual rate of $1.309 trillion, falling 0.1% from the revised September estimate of $1.310 trillion.
Notably, October’s spending is 4.9% above the October 2017 estimate of $1.25 trillion.
Spending on private construction was at a seasonally adjusted annual rate of $999 billion, 0.4% below the revised September estimate of $1.003 trillion.
Of that, residential construction spending was at a seasonally adjusted annual rate of $539 billion in October, which is 0.5% below the revised September estimate of $542 billion.
Although construction spending fell month-over-month, the National Association of Home Builders/Wells Fargo Housing Market Index revealed that declining material costs and a strong economy contributed to homebuilder confidence climbing one point to 68 in October.
Despite this climb, NAHB Senior Economist Danushka Nanayakkara-Skillington claimed home sales declined this month as housing affordability continued to be a hurdle for consumers.
“While a solid economy and positive demographics support future demand for housing, it is critical to address this mounting affordability crisis,” Nanayakkara-Skillington said.
NAHB Chairman Randy Noel said policymakers should see this drop in sales as an indicator that housing affordability will continue to slow down the market.
“The November reading is consistent with reports from our builders, who say that the job market and demographic tailwinds bode well for housing demand, but rising interest rates and home prices are forcing customers to take a pause,” Noel stated.
The latest NAHB Housing Opportunity Index indicated that Housing affordability remained at a 10-year low in the third quarter of 2018, which is the lowest reading since mid-2008.
“Ongoing job and economic growth provide a solid backdrop for housing demand amid recent declines in affordability,” NAHB Chief Economist Robert Dietz said. “However, housing affordability will need to stabilize to keep forward momentum from diminishing as we move into the new year.”