Construction Spending Declines

In another sign that homebuilders are pulling back, spending on residential construction fell 1.9% in October to $597.1 billion -- marking the seventh consecutive monthly decline, according to the Census Bureau.Construction spending is off 9.4% since October 2005, and builders are dealing with a 558,000 inventory of unsold homes, which represents a seven-month supply. In addition, the inventory of existing homes rose to 3.8 million in October, which is a 7.4-month supply at the current sales pace. The National Association of Home Builders has voiced concern that the large inventory of homes will make it harder for builders to sell their inventory. These concerns are heightened by a 30% jump in the number of vacant homes on the market over the four quarters ended Sept. 30. The number of vacant homes for sale totaled 1.9 million in the third quarter. "Normally, one third of existing homes are vacant, but now it is closer to half," said NAHB economist Michael Carliner. He said he suspects that a lot of these vacant homes were rentals or second homes that owners now want to sell to pocket gains or cut their losses.