Outlays to build homes in the U.S. plunged in June as the Federal Reserve rapidly raised interest rates to fight inflation, data from the Commerce Department showed Monday.
Outlays to build homes in the U.S. plunged in June as the Federal Reserve rapidly raised interest rates to fight inflation, data from the Commerce DepartmentExpenditures for residential construction fell 1.6 percent to a seasonally adjusted, annualized rate of $932.9 billion in June after climbing 0.8 percent in May. Spending had been decelerating in the five prior months. This was the first contraction since May of 2020.
Private sector spending on single-family homes fell by a sharp 3.1 percent to a seasonally adjusted and annualized rate of $467.5 billion in June. Compared with a year ago, spending in this category is up 8.4 percent. Single-family homes are the most sensitive to interest rate changes. In June, the average interest rate on a 30-year fixed mortgage rose to 5.52 percent, the highest since November of 2008, and has declined slightly in July.
Overall outlays for construction projects dropped 1.1 percent in June at a seasonally adjusted annual rate of $1.76 trillion. Economists had been expecting a 0.4 percent increase. The May figure was revised up to show a 0.1 percent rise from the preliminary report showing a 0.1 percent decline. Office construction spending rose 0.5 percent in June to $73.4 billion but is down 2.1 percent from a year ago. Spending to build hotels and motels fell 0.2 percent to $16.4 billion and is down 2.1 percent from a year ago.
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