WASHINGTON -- U.S. construction spending showed a tiny increase in January as strength in housing helped to offset declines in nonresidential building and government projects. Construction spending edged up 0.1 percent in January, significantly slower than an upwardly revised 1.5 percent gain in December, the Commerce Department reported Monday. Homebuilding was up 1.1 percent in January with single-family construction rising 2.3 percent and apartment building up 1 percent.
However, there was widespread weakness outside of housing. Non-residential construction fell 0.2 percent and office building was flat, with bad weather likely a factor in the weakness. Total government construction was down 0.8 percent in January compared with December. Construction spending totaled $943.1 billion in January at a seasonally adjusted annual rate.
The 1.1 percent rise in housing construction was just half of the 2.5 percent gain in December. Economists had expected the January weakness, believing that construction, like other parts of the economy, would be slowed by the unusually cold weather. However, the expectation is that builders will see better gains once spring and warmer weather arrive.
Most economists are looking for sales of new and existing homes to show further gains in 2014, bolstered by an improving economy and steady job growth. Sales of new homes rose 9.6 percent in January to a seasonally adjusted annual rate of 468,000. It was the fastest pace since July 2008. The surge came as a surprise to economists. Most had expected a decline in January, in part because they thought purchases would be held back by winter storms in much of the country. Sales had fallen 3.8 percent in December and 1.8 percent in November, prompting concerns that the housing recovery might be losing momentum.
Housing, while still a long way from the boom of several years ago, has been recovering over the past two years. Residential construction has grown at double-digit rates and contributed about one-third of a percentage point to overall economic growth last year. Economists expect home construction will rise in 2014 although at a slower pace than in 2013.
Economists are optimistic about further sales gains because they think the overall economy will strengthen this year as more people find jobs and last year's drag from higher federal taxes and government spending cuts eases. One assumption underlying expectations on housing: Even as the Federal Reserve keeps scaling backs its bond purchases, which were used to keep long-term rates low, mortgage rates will rise only gradually this year.
SIZABLE HOMES IN SMALLER MARKETS, FOR UNDER $100,000:
7 Affordable Homes in Smaller Markets
Homebuilders Lift Construction Industry
The small town of Rock Island, Ill., is part of the Quad Cities about 175 miles west of Chicago, has a population of about 39,000. There’s a wide variety of housing available in Rock Island including historic homes, downtown condos, new construction in the heart of the city, and wooded retreats. And the prices vary, from a $1.45 million "House on the Hill" overlooking the Rock River Valley, to this three-bedroom, three-bath one pictured for under $100,000.
List Price: $99,900 - The brick "Magill House" at 2,253-square-feet is a registered historic home. Built in 1868 in the Italianate style, it was revived in 1992 with updates and additional improvements. There is a beautiful, winding wood staircase, hardwood floors on the main level, a master bath, a breakfast nook, built-ins, and heated three-car garage.
Spokane, home of the 1974 World's Fair, sits in the county seat of the same name. With just more than 200,000 residents, it is second largest city in the state of Washington but still small enough to rank low among major cities, giving residents the best of both worlds.
List Price: $99,500 - This updated Craftsman on the north side of town is nestled on the corner of a tree-lined street in a quiet neighborhood, according to its listing. At 3,054 square feet, this four-bedroom home is bigger than it might first appear and even has two rental units on site.
Located on the Mississppi River, Dubuque is home to baseball's "Ghost Players" -- the guys who played the old ballplayers in the Kevin Costner film "Field of Dreams." But it also likes to be known as the first town that was established in the state of Iowa, according to its Chamber of Commerce.
List Price: $118,840 - This three-story brick, historic federal-style farmhouse with a Dutch roof has been restored. It has six bedrooms, three baths, hardwood floors, and a front and a rear stairway. There are two cement patios, and one of them is fenced.
Omaha is the largest city in Nebraska, but is No. 42 on the list of largest U.S. cities, behind Mesa, Ariz., and Virginia Beach, Va. The city is also home to one of the wealthiest men in the world, Warren Buffet, who lives in one of the most modest homes for his status, as HuffPost Home has reported. The Wizard of Omaha has said "a house can be a nightmare if the buyer's eyes are bigger than his wallet."
List Price: $100,000 - One of the smallest on our list, this 1,025-square-foot single-family home (pictured) has three bedrooms and two bathrooms. Built in 1964 it has a tuck-under garage. However, we can't guarantee that if you buy it, you'll also gain even a quarter of Buffett's wealth.
Mobile goes by the slogan "secretly awesome," according to its tourism website, and is near Pensacola, Fla. It was also recently ranked No. 2 in U.S. metro cities with the highest economic growth potential by Business Facilities magazine, coming in behind Baton Rouge, La.
List Price: $69,900 - At 2,300-square-feet, this four-bedroom home has so much space for the money. The large living room leads to the family room with a gas-log fireplace. Its family room opens up to the kitchen and dining area, according to the listing. Out back, a patio leads to a guest apartment, which has a full bath and a kitchenette.
Louisville is home to the Kentucky Derby and the Muhammad Ali Center. The city also recently noted on its website that it has regained all 42,000 jobs that were lost during the recession. Louisville is outperforming several peer metro areas in post-recession job growth. Among the 100 most populated metro areas, the Louisville metro area ranked 26th in recovering from the recession, according to the Brookings Institution's Metro Monitor.
List Price: $100,000 - With three bedrooms, two full baths and hardwood floors, this pictured home has a large living room that goes across the whole front of the house. There is also a two-sided staircase, and a full bath on each floor. "The large backyard is perfect for family gatherings," says the listing.
Ranked at number 12 among the DMAs, it is hard to call Indianapolis a small town, but this Midwestern city about a two-hour drive from the Chicago metro area does have a small city feel, in comparison.
List Price: $100,000 - With 3 bedrooms and 2,635 square feet, this home is a bargain for a city of its size. Built in 1922, it has a covered porch, hardwood floors and stairs.