Construction Spending Dips 0.3% in July Amid High Mortgage Rates

Construction spending decreased by 0.3% in July after remaining unchanged in June.

Spending totaled $2.163 billion in July, down from the revised June estimate of $2.169 billion, the Census Bureau said in a Monday (Sept. 3) press release.

The drop was greater than expected by economists, Reuters reported Monday. Those surveyed by the media outlet had forecast a decline of 0.1%.

Reuters attributed July’s decrease in construction spending to mortgage rates that rose in the spring and an increased supply of single-family homes that was caused by that increase.

The Census Bureau data showed spending on private construction dipped 0.4.% compared to June, with both residential construction and nonresidential construction down by the same percentage.

Public construction spending inched up 0.1% compared to the previous month. The biggest gains were in commercial, office and power construction, which were up 4.1%, 3.7% and 3.4%, respectively.

The Federal Reserve reported in May that banks were seeing a slide in demand for loans at the same time that they were tightening lending standards.

In a survey of loan officers that covered the first quarter and was released May 6, the Fed said pressures have impacted loans of all types, including both commercial and consumer options.

The Fed said “for loans to households, banks reported that lending standards tightened across some categories of residential real estate (RRE) loans while remaining unchanged for others on balance … Moreover, for credit card, auto and other consumer loans, standards reportedly tightened and demand weakened.”

In July, the Consumer Financial Protection Bureau (CFPB) issued a proposed rule that would require mortgage servicers to do more to help struggling homeowners before foreclosing. The regulator will accept public comment on the proposed rule until Sept. 9.

“When struggling homeowners can get the help they need without unnecessary obstacles, it is better for borrowers, servicers and the economy as a whole,” CFPB Director Rohit Chopra said in a press release announcing the proposed rule.

In August, real estate technology platform HomeLight said it raised $20 million in new funding to help expand its bridge loan product called Buy Before You Sell, which helps homebuyers unlock equity from their existing home.