Total Construction Falls in May as Housing Stumbles

Single-Family Construction Feeling Brunt Of Higher Material Prices; Highways Surge Higher.

By Mark S. Kuhar

Total construction starts dropped 1% in May to a seasonally adjusted annual rate of $902.8 billion, according to Dodge Data & Analytics. The brunt of the decline was borne by residential starts, while nonresidential and nonbuilding starts continued their recovery from the COVID-19 pandemic. 

“The weight of higher material prices and a lack of skilled labor are having a direct and notable influence on residential construction activity,” said Richard Branch, chief economist for Dodge Data & Analytics. “These negative factors are expected to continue to impact the sector over the remainder of the year and will result in a less positive influence from housing on overall levels of construction activity. While feeling similar effects, the nonresidential sector continues its modest recovery off the lows of last summer. There are enough projects in the planning pipeline to suggest this trend should continue into next year, but higher material prices will result in longer lead times to groundbreaking and more temperate improvements in nonresidential starts.”

Nonbuilding Construction
Nonbuilding construction starts rose 5% in May to a seasonally adjusted annual rate of $199.2 billion. The utility and gas plant category increased 22% due to the start of a large transmission line, while highway and bridge starts rose 9% and environmental public works moved 8% higher. 

The miscellaneous nonbuilding category lost 33% in May. Year-to-date through the first five months of 2021, total nonbuilding starts were 8% higher than in 2020. Environmental public works were up 37%, while utility/gas plant and miscellaneous nonbuilding starts were up 25% and 11%, respectively. Highway and bridge starts were down 10% through five months.

For the 12 months ending May 2021, total nonbuilding starts were 5% lower than the 12 months ending May 2020. Environmental public works starts were 18% higher, while utility and gas plant starts were down 23%. Highway and bridge starts were down less than one percentage point, and miscellaneous nonbuilding starts were 14% lower through five months.

The largest nonbuilding project to break ground in May was the $915 million Gateway South transmission project in Medicine Bow, Wyo.

Nonresidential Building 
Nonresidential building starts jumped 10% in May to a seasonally adjusted annual rate of $309.5 billion. Manufacturing starts more than doubled over the month as a large refinery broke ground. Commercial starts gained 6%, with only the office category losing ground. Institutional starts were down 2%, despite a large increase in healthcare projects. 

Year-to-date, total nonresidential building starts were down 5% compared to the first five months of 2020. Institutional starts were 9% lower, while commercial starts were down 7%. Manufacturing starts were up 42% on a year-to-date basis. 

For the 12 months ending May 2021, nonresidential building starts were 19% lower than the 12 months ending May 2020. Commercial starts were down 20%, while institutional starts fell 14%. Manufacturing starts dropped 43%.

The largest nonresidential building project to break ground in May was the $1.5 billion Diamond Green Diesel refinery in Port Arthur, Texas.

Residential Building 
Residential building starts lost 10% in May to a seasonally adjusted annual rate of $394.2 billion. Single-family starts were 12% lower, while multifamily starts dropped 7%. Year-to-date, total residential starts were 30% higher than the same period a year earlier. Single-family starts were up 37%, while multifamily starts were 12% higher.

For the 12 months ending May 2021, total residential starts were 18% higher than the 12 months ending May 2020. Single family starts gained 27%, while multifamily starts were down 2% on a 12-month sum basis.

The largest multifamily structure to break ground in May was a $500 million mixed-use project in Brooklyn, N.Y.

Regionally, May’s starts rose in the Midwest, South Atlantic and West but fell in the Northeast and South Central regions.

Related posts