Washington, DC, Dec. 1--Construction spending jumped an unexpected 0.9 percent in October, setting a new record for a fourth straight month, as low mortgage interest rates pushed home building to unprecedented levels, the government said Monday.
Overall construction spending rose to a seasonally adjusted annual rate of $922.0 billion in the month from an upwardly revised $913.5 billion in September, the Commerce Department said. The gain came despite a 2.1 percent slide in commercial real estate building, particularly power plants and factories.
Analysts polled by Reuters had expected a 0.6 percent rise in overall construction spending.
Private residential construction spending rose 2.2 percent to $484.1 billion, a record high, from $473.6 billion.
But private nonresidential construction, which has yet to recover from a long drought in business spending, logged the biggest slide since a 2.3 tumble in December last year.
Meanwhile, total public construction headed into uncharted territory on record spending on state and local and federal construction, Commerce said. Government spending on schools, transportation and parks and recreation all rose.
Low mortgage rates and strong demand have fueled a multiyear U.S. housing boom even as the broader economy struggled to find its feet after the 2001 recession.
"Those trends have been in place for some time and they still look pretty solid," Gary Thayer of A.G. Edwards & Sons in St. Louis said of the construction report.
While home mortgage rates have drifted above four-decade lows set earlier this year, they remain at relatively low levels. According to housing finance giant Freddie Mac, the average rate on a 30-year fixed-rate loan was 5.95 percent in October, down from 6.15 percent in September.
Analysts had been expecting rising mortgage rates, which boost homeownership costs, to cool the red-hot housing market.
In a separate report, a government agency said average U.S. house prices rose 5.61 percent in the third quarter from a year earlier. The government said the housing market is showing "stabilization of prices with continued strength."
The market for existing homes softened in October, as sales fell a larger-than-expected 4.9 percent, the National Association of Realtors said last week.
A trade group said last week that applications for mortgages continued to climb, as the improving job market and persistently low mortgage rates boosted demand for homes.
