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April construction spending in U.S. rose by most since 2000

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WASHINGTON -- Construction spending in the United States rose in April by the most since 2000 as demand related to the end of a tax credit spurred builders to break ground on more houses.

The 2.7 percent increase brought spending to $869 billion, after a revised 0.4 percent gain in March that was more than previously estimated, Commerce Department figures showed Tuesday.

Sales boosted by a government incentive of as much as $8,000 helped reduce the number of unsold new houses in April to the lowest level in more than three decades, spurring housing starts.

While government construction also increased for a second month, spending may be limited by tighter state and local budgets.

"The turn in housing is encouraging," Michael Englund, chief economist at Action Economics LLC in Boulder, Colo., said before the report.

"We've cleared away enough new homes inventories that at least we can add some construction," Englund said. "Non-residential construction is still quite weak."

The gain in April was the biggest since August 2000. Construction spending decreased 11 percent in the 12 months ended in April.

Private construction spending rose 2.9 percent, the most since July 2004.

Homebuilding outlays jumped 4.4 percent, the biggest gain since October 2009.

Private non-residential projects increased 1.7 percent, the most since September 2008 and led by factories and power facilities.

Spending on public construction rose 2.4 percent from the prior month. Federal construction spending increased 2.9 percent, while state and local government outlays rose 2.3 percent.


In San Diego County for April, the Burbank-based Construction Industry Research Board reported single- and multi-family new home construction permits fell from their year-over-year totals for the first time this year.

The CIRB statistics showed new-home construction permits in San Diego County were up 31 percent in April compared to March, but were down 24 percent compared to April 2009.

The 221 single-family and 97 multi-family units that received permits in April accounted for the most residential units permitted in 2010.

In April 2009, there were 227 single-family permits pulled and 194 multi-family permits pulled.

For San Diego County, the CIRB survey showed no permits for industrial construction.

February was the only month that had any industrial permit activity in the county and that was for valued at $638,000.

Surveys vary, but most agree that San Diego's industrial vacancy is in the low double digits -- instead of single digits -- for the first time in many years.

New commercial construction, which includes both retail and office, The CIRB tallied permits valued at $14.9 million in April.

While more than four times the $3.09 million in April 2009, it is still a low figure by historical standards.

The research firm reported permits for about $46 million worth of commercial work through April -- or marginally less than the $50 million through the first four months of 2009.

The CIRB reported $31.2 million worth of nonresidential alteration and addition permits in April -- 21.4 percent less than $39.7 million during April 2009.

The research firm tallied $118.4 million in nonresidential alteration and addition work through April -- or 11.9 percent less than the $134.51 million through the first four months of 2009.

In the category of "other," which includes everything from small buildings to pump stations, permits were pulled for $30.7 million worth of work in April, a 54.8 percent gain over the $19.9 million in April 2009, due mainly to one project.

The "other" category was able to muster $44.3 million worth of work through April, 22 percent less than the $56.72 million during the first four months of 2009.

For San Diego County, the CIRB counted $76.8 million in total nonresidential construction in April, 11.9 percent more than the $68.6 million in the like month last year.

All told, a total of $209.4 million in nonresidential construction was recorded by the CIRB, 17.9 percent less than the $255.1 million in the comparable month in 2009.

Home sales

Sales of new homes surged in March by the most since 1963, as buyers rushed in before the tax credit expired.

The jump in demand brought the number of new houses for sale down to 228,000, the lowest since March 1971, Commerce Department figures showed last month.

Builders broke ground on homes at a 672,000 annual rate in April, the most since October 2008.

Toll Brothers Inc. (NYSE: TOL), the largest U.S. luxury homebuilder, increased its land holdings for the first time in four years in anticipation of a housing recovery.

The Horsham, Pa.-based company also said the number of houses under contract but not yet sold rose in the three months ended April 30 for the first time on a year-over-year basis since 2006.

"People are not as scared any longer that a house is a lousy investment," Chairman Robert Toll said on a conference call on May 26.

Job creation

Sustained improvement in housing, the weakest part of the economy, will require job creation and a drop in foreclosures, which have been returning more homes to the market, pushing down prices and competing with new houses.

Spending on structures, including office buildings and factories, dropped at a 15.3 percent pace, while homebuilding declined at an 11 percent rate.

Commercial real estate is being hurt by high vacancy rates and excess capacity at factories.

Vacancies at offices, shops and warehouses will rise until at least the end of this year on lingering effects of the economic slump, the National Association of Realtors said on May 26.

Annual office rents will fall 2.3 percent in 2010 and 2.1 percent next year, the Realtors group said.

Daily Transcript writers Jen Lebron Kuhney and Thor Kamban Biberman contributed to this report.

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