WASHINGTON – April construction spending across the nation exceeded analyst predictions, driven primarily by single-family home construction, even as climbing mortgage rates connected to the war with Iran continue to create challenges for housing markets.
Data released Monday by the Commerce Department’s Census Bureau showed construction spending climbed 0.4% following a revised 0.2% gain in March. Financial analysts surveyed by Reuters had anticipated a 0.2% increase after March’s initially reported 0.6% growth.
Year-over-year construction spending grew 0.9% in April. Private construction project spending moved up 0.4% after the previous month’s 0.2% gain.
Residential construction investment jumped 0.8% following March’s 0.6% increase. New single-family housing project spending surged 1.4%.
Mortgage rates have climbed sharply as the U.S.-Israeli conflict with Iran has fueled inflation concerns. Last week, the widely-tracked 30-year fixed mortgage rate hit 6.53%, marking a nine-month peak according to mortgage finance agency Freddie Mac data. This compares to 5.98% at February’s end when the conflict began, as Freddie Mac and Fannie Mae increased their mortgage-backed securities purchases.
Climbing mortgage rates are dampening housing demand and limiting builders’ capacity to start new single-family construction projects. Construction companies also face elevated expenses from tariffs, land scarcity, and workforce shortages.
Multi-family housing unit spending, representing a smaller portion of the housing sector, dropped 0.3% in April.
Private nonresidential structure investment, including power plants and manufacturing facilities, declined 0.2% in April. Nonresidential structure spending has decreased for nine consecutive quarters, even with increased data center construction supporting artificial intelligence development.
Public construction project investment grew 0.4% after March’s 0.2% rise. State and local government construction spending increased slightly by 0.1% in April, while federal government project expenditures surged 4.8%, potentially tied to detention center construction amid immigration enforcement efforts.
