Construction Spending on Positive Streak

A sign that an economic recovery is slowly getting underway is evident by figures from one of the most deeply impacted industries during the recession — the construction industry.

November marked a third consecutive month with construction spending up. Development of new homes, along with an increase in government funding for federal construction projects, is giving the badly beaten construction industry a boost. The New Year is starting with some optimism, following a very bleak summer.

The Commerce Department says construction spending increased 0.4 percent in November to an annual rate of 810 billion dollars. That’s the highest level since last June. Construction, especially of new homes, suffered greatly due to the recession. Building activity is now just 2.3 percent higher than in August, when it dropped to its lowest level in a decade.

With signs of an economic turnaround taking shape, home buyers who are eligible can take advantage of very attractive mortgage rates, with a bit more confidence that the nation’s economy will improve going forward.

Analysts are still cautious, as government spending is likely to drop in the second half of 2011. Government projects may wind down as the new Congress looks to cut back due to tremendous budget deficits.

Some economists think homebuilding activity has finally hit bottom, and a sustained recovery is still some time off into the future. A big challenge for a sustainable recovery involves the banks. Builders continue to have difficulties obtaining financing for projects as banks have tightened credit standards in response to high default rates.