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Construction spending falls 2.1% in January

Construction spending fell unexpectedly in January, but the housing sector overall is showing promising signs for a much healthier 2013, regardless.

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Construction spending falls in January

According to the U.S. Census Bureau of the Department of Commerce, construction spending in January fell 2.1 percent below the revised December estimate of $902.6 billion, representing the first decline since March 2012.

While construction spending was forecast to improve slightly in January, the figure is still 1.8 percent above the January 2012 estimate.

Public construction spending only fell 1.0 percent while private construction spending slid a total of 2.6 percent for the month. Nonresidential private construction dipped an unexpected 5.1 percent, dragging the total rate down across the board.

Real estate market sending mixed signals

As housing has found its bottom and is struggling to recover, many are finding the mixed signals confusing, but it is natural for any recovery to simultaneously struggle and improve.

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Take for example the fact that completed foreclosures rose 10.5 percent in January, which may were surprised by, but it should not have been shocking, as Fannie Mae and Freddie Mac had frozen foreclosures not only for the holidays but for Superstorm Sandy victims. Overall, however, mortgage delinquency rates are falling across the board as the sector slowly recovers.

Meanwhile, pending home sales are up, yet mortgage application volume is down, pointing to the critical facts that not only is lending still “unreasonably” tight, according to many analysts, but inventory remains tight, complicating sales.

Finally, Dr. Lawrence Yun, NAR chief economist, said home buyers are able to stay well within their means. “Although 2012 was highest on record, the excessively tight underwriting precluded many would-be homebuyers from locking-in generational low interest rates.” This year has kicked off with continued historically low mortgage interest rates which could rise slightly, but will likely remain low for an extended period, given the Federal Reserve’s commitment to keeping rates low until the unemployment rate hits 6.5 percent or lower.

“Rising home prices and a gradual uptrend in mortgage interest rates will offset improvements in family income, but 2013 likely will be the third best on record in terms of household buying power,” Dr. Yun noted.

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Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

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