WASHINGTON — A surge in homebuilding pushed U.S. construction spending up by the largest amount in five months, the latest indication that the housing sector is slowly recovering.
Construction spending rose 0.9 percent in May, following a 0.6 percent rise in April, the Commerce Department reported Monday. It was the biggest percentage gain since December.
The May increase pushed spending to a seasonally adjusted annual rate of $830 billion. That is 11.3 percent above a 12-year low hit in February 2011. Still, the level of spending is roughly half of what economists consider to be healthy.
Residential construction rose 3 percent to an annual rate of $261.3 billion, further evidence that housing has finally started to mount a modest recovery.
Spending on nonresidential projects rose 0.4 percent in May to an annual rate of $299.1 billion, the third straight monthly gain. In May, spending on shopping centers, hotels and office buildings all saw gains.
Government construction projects fell 0.4 percent to an annual rate of $269.6 billion, the lowest level since November 2006. Spending at the state and local level fell 1 percent to $242.6 billion at an annual rate. Federal construction rose 5.6 percent to a rate of 427 billion.
Recent data suggest the housing market is gradually improving after struggling for the past five years.
Homebuilders started work on more single-family homes in May and requested the most permits to build homes and apartments in three and a half years. Completed sales of new and previously occupied homes were up in May from the same month last year. The number of people who signed contracts to buy homes rose in May to match the fastest pace in two years.
Home prices are rising in most markets. And mortgage rates have tumbled to the lowest levels on record, which has encouraged more buying.
One reason prices are rising is the supply of homes for sale remains extremely low. There were 145,000 new homes for sale in May. That's just 1,000 higher than in April, when the supply was the lowest on records dating back to 1963.
With the supply is thin and sales rising, builders can charge more. It also means there's room for more competition. Economists say that may explain why builders are laying plans for more homes and apartments over the next 12 months.1 comment on this story
Still, the market is long way from returning to full health. A sluggish job market could deter some would-be buyers from making a purchase this year. The U.S. economy created only 69,000 jobs in May, the fewest in a year. The unemployment rate rose to 8.2 percent last month from 8.1 percent in April.
While spending on homebuilding has risen, spending on government building projects has fallen. Governments at all levels have been struggling to deal with huge budget gaps caused by the recession.
The economy grew at a tepid annual rate of 1.9 percent in the January-March quarter. Residential construction added to growth. But many economists expect growth slowed in the April-June quarter.