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The Latest or ig i nat ion ANALYTICS Experts See Silver Lining in CaseShiller News While S&P recorded a 0.1 percent monthly price drop in November 2012, analysts at Capital Economics and IHS Global Insights insist the adjusted data looks better. S e c on da r y M a r k e t a na ly t ic s se r v ic i ng F Construction Spending Climbs to $850 Billion The Census Bureau reports spending rose to an annualized rate of $885 billion in December 2012, bringing the annual total up 9.2 percent from the previous year. S pending on construction rose in December to a seasonally adjusted annualized rate of $885 billion, the Census Bureau reported. December's total spending was 0.9 percent up from November's revised rate of $876.9 billion and 7.8 percent up from December 2011's rate of $820.6 billion. Based on December's estimate, total construction spending reached $850.2 billion in all of 2012, a 9.2 percent increase from $778.2 billion the prior year. Spending on private construction climbed 2 percent above November's revised estimate to reach an annualized pace of $614.9 billion in December, Census reported. Residential construction spending was at an adjusted annual rate of $308.2 billion, up 2.2 percent 72 | The M Report month-over-month and 26.3 percent year-over-year. According to the bureau, spending on private home construction rose to $144.8 billion, a bump of 0.8 percent from November and 28.3 percent from December 2011. Multifamily spending reached $25.8 billion, rising 6.2 percent on a monthly basis and 57.4 percent on an annual basis. Spending on private nonresidential building was at an adjusted annual rate of $306.7 billion (up 1.8 percent from November and 7.6 percent from the previous year). The educational, power, and manufacturing sectors posted the largest monthly increases: 6.4 percent, 3.7 percent, and 2.5 percent, respectively. Including December's estimates, the total value of private construction in 2012 was $574.6 billion, 16.1 percent above 2011. Residential construction throughout the year totaled $276.8 billion, 16.8 percent higher than in 2011. Meanwhile, spending for public construction continued to see monthly declines. The estimated seasonally adjusted annual rate of public construction spending was $270.1 billion in December, a 1.4 percent drop from November's revised estimate of $274.1 billion. Spending on public housing construction saw a 2.6 percent drop month-over-month and a 17.3 percent drop year-over-year, falling to an adjusted annualized rate of $6.4 billion. The value of public construction in 2012 was $275.6 billion, 2.7 percent below the $283.3 billion spent in 2011, Census reported. ollowing S&P's calculation of a 0.1 percent decrease in prices in November, according to the Case-Shiller 20-city composite, analysis on home price data remained positive. "[A] fter accounting for the normal slowdown in the housing market over the winter months, this actually looks like another 0.6 percent [month-over-month] gain," stated Capital Economics. Similarly IHS Global Insight's Stephanie Karol noted both CaseShiller indices, when seasonally adjusted, posted increases for the 10th consecutive month. These increases "are making a difference," she said. Karol pointed out higher prices are leading to increased household wealth; rising property taxes, which are benefiting local governments; and renewed opportunities for homebuilders. Household wealth rose by more than $1 trillion over the first three quarters of last year, Karol stated, citing information from the Federal Reserve. During the same period, more than 1.4 million homeowners rose above water on their mortgages, according to data from CoreLogic. Both Capital Economics and IHS anticipate continued price increases throughout this year. IHS attributes the recent increases to three factors: job growth, diminishing inventories, and low interest rates. "These three drivers will keep home prices moving up in 2013," Karol said. While Phoenix outpaced all other cities in Case-Shiller's indices with a 22.8 percent price gain year-over-year in November, Capital Economics says these types of drastic gains "are unlikely to be sustainable." The firm suggests prices will continue to rise but at milder rates. IHS pointed New York's price decline as an "eyesore" in the recent Case-Shiller Indices. Foreclosures are playing a role in New York's current market woes.