Spending on construction projects in the United States hit a record high in January as new home sales continued to drive the sector. Per the latest data released by the Commerce Department on Mar 1, construction spending increased 1.7% in January.
Although the economy was battered for more than a year due to the COVID-19 pandemic, record low mortgage rates led to elevated demand and sales of single-family homes. Interestingly, the rise in spending was witnessed in both private and public sector unlike in December.
Construction Spending Hits Record High
The Commerce Department said on Mar 1 that construction spending jumped a solid 1.7% in January to $1.521 trillion. This is the highest level since the government began tracking the series in 2002. The gains in January follow a 1.1% rise in December instead of 1% as previously reported.
Moreover, construction spending increased 5.8% on a year-over-year basis in January, thus once again proving that people are showing faith in the economy.
January’s gains were driven by increased spending on private projects such as homebuilding, which grew a robust 2.5%. Spending on non-residential construction like oil well and gas drilling increased 0.4%. Construction spending on private projects increased 1.7% in January after rising 1.5% and 1.2% in November and December, respectively. Spending on government projects jumped a solid 6.8% in January.
Homebuilding Industry Driving Construction Spending
The Commerce Department said that spending on residential construction increased 2.5% in January following a 3.8% increase in the prior month. Spending on single-family home construction increased 3%.
Last week, the Commerce Department had reported that new home sales increased 4.3% in January on a month-over-month basis and 19.3% on a year-over-year basis. In a separate report, the government stated that applications for building permits increased a robust 10.4% in January.
A record low mortgage rate is helping the homebuilding industry that has seen a surge in demand for single-family homes. Another reason behind the drive in private residential construction spending is the falling inventory of existing homes, as supply is trying to catch up with demand.
Demand for new homes in the United States has been on the rise owing to record low mortgage rates. Private residential construction spending has also picked up in order to cater to the escalating demand for new homes, thus making for the right opportunity to invest in homebuilding stocks.
Beazer Homes USA, Inc. ( BZH Quick Quote BZH - Free Report) designs, builds and sells single-family homes. The company designs homes to appeal primarily to entry-level and first move-up home buyers.
The company’s expected earnings growth rate for the current year is 16.4%. The Zacks Consensus Estimate for current-year earnings has improved 20.8% over the past 30 days. The company has a Zacks Rank #2 (Buy).
Century Communities, Inc. ( CCS Quick Quote CCS - Free Report) is a home building and construction company. Its activities comprise land acquisition, development and entitlements; and the acquisition, development, construction, marketing, and sale of various single-family detached and attached residential home projects.
The company’s expected earnings growth rate for the current year is 33.8%. The Zacks Consensus Estimate for current-year earnings has improved 31.9% over the past 30 days. Century Communities sports a Zacks Rank #1 (Strong Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here. KB Home ( KBH Quick Quote KBH - Free Report) is a well-known homebuilder in the United States. The company’s Homebuilding operations include building and designing homes that cater to first-time, move-up and active adult homebuyers on acquired or developed lands.
The company’s expected earnings growth rate for next year is 63.3%. The Zacks Consensus Estimate for current-year earnings has improved 19.7% over the past 60 days. The company carries a Zacks Rank #2.
D.R. Horton, Inc. ( DHI Quick Quote DHI - Free Report) is one of the leading national homebuilders, primarily engaged in the construction and sale of single-family houses both in the entry-level and move-up markets.
The company’s expected earnings growth rate for thenext year is 41%. The Zacks Consensus Estimate for current-year earnings has improved 2.8% over the past 30 days. The company has a Zacks Rank #2.
Toll Brothers Inc. ( TOL Quick Quote TOL - Free Report) builds single-family detached and attached home communities; master planned luxury residential resort-style golf communities; and urban low, mid, and high-rise communities, principally on the land it develops and improves.
The company’s expected earnings growth rate for thenext year is 45.9%. The Zacks Consensus Estimate for current-year earnings has improved 8.3% over the past 30 days. The company carries a Zacks Rank #2.
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