As 2020 began, it looked a lot like 2007 for construction and housing

Despite a lot of shakiness in today's economy, we found out today that American construction spending got off to a big-time start in January.

Total Construction
Construction spending during January 2020 was estimated at a seasonally adjusted annual rate of $1,369.2 billion, 1.8 percent (±0.8 percent) above the revised December estimate of $1,345.5 billion. The January figure is 6.8 percent (±1.3 percent) above the January 2019 estimate of $1,282.5 billion.

Private Construction
Spending on private construction was at a seasonally adjusted annual rate of $1,022.7 billion, 1.5 percent (±0.7 percent) above the revised December estimate of $1,007.6 billion. Residential construction was at a seasonally adjusted annual rate of $554.8 billion in January, 2.1 percent (±1.3 percent) above the revised December estimate of $543.6 billion. Nonresidential construction was at a seasonally adjusted annual rate of $468.0 billion in January, 0.8 percent (±0.7 percent) above the revised December estimate of $464.1 billion.

Public Construction
In January, the estimated seasonally adjusted annual rate of public construction spending was $346.5 billion, 2.6 percent (±1.5 percent) above the revised December estimate of $337.8 billion. Educational construction was at a seasonally adjusted annual rate of $81.5 billion, 0.7 percent (±1.8 percent)* above the revised December estimate of $80.9 billion. Highway construction was at a seasonally adjusted annual rate of $103.9 billion, 5.4 percent (±4.6 percent) above the revised December estimate of $98.6 billion.

Construction spending has rallied in the last few months after it declined in much of 2018 and the first part of 2019, and it goes along with a sizable jump in home permits to start 2020, and a large increase in housing starts at the end of 2019.

In addition, construction likely got an extra boost from the 5th warmest American January on record, which lessened seasonal declines in the sector. We saw the same pattern in the employment report for January, where construction gained a seasonally-adjusted 44,000 jobs.

Another report from last week showed that new housing sales and prices were jumping just like the construction work was.

Jan 2018 vs January 2019
New Home Sales Volume +18.6%
Median New Home Sales Price +14.0% (to $348,200)
Average Home Sales Price +11.4% (to $402,300)

In fact, it was the highest amount of new home sales since 2007. Oh wait, that doesn't sound so good, does it?

I know interest rates had fallen by January, and have fallen a lot more since then, but who is able to pay another 14% to get a new house? Can’t think it’s the typical American, who’s seeing wages rise by an average of 3.1% a year.

Let's check back on these construction and home buying figures, because it got a nice boost at the start of January with many favorable conditions. The weather wasn't as favorable in February, and with talk of a global recession rising along with new coronavirus cases, will the plummeting interest rates be overridden by the fact that fewer people will have the financial security to buy in?