Construction jumps on rush for tax credit

The end of the homebuyers tax credit helped construction spending rise in April by the largest amount in nearly 10 years.

Construction activity jumped 2.7 percent in April compared to a revised 0.4 percent gain in March, the biggest single-month surge since August 2000, according to figures released Tuesday by the Commerce Department.

{mosads}March figures themselves were revised up from an initial 0.2 percent. Residential construction rose 4.4 percent to a seasonally adjusted annual pace of $263 billion, according to the report.

The strong figures could suggest the housing sector is finally beginning to recover after a brutal few years.

But the numbers also likely reflect a rush to take advantage of a tax incentive that offered homebuyers as much as an $8,000 tax credit on purchases through April 30. Now that the credit has expired, it is unclear whether strong growth in construction will continue.

Neither Congress nor K Street seems to have any large-scale plans in the works to revive that tax incentive, which was extended and expanded at the end of last year.

The National Association of Realtors (NAR) lobbied for the extension last year, but the group did not push for the credits to be renewed after their expiration in April.

Lawmakers and the administration are now putting more of their efforts behind different pieces of jobs legislation that would lower the unemployment rate and turn more people into prospective homebuyers.

There were signs last week from two large homebuilders that the housing market may be undergoing a more sustained recovery.

Toll Brothers Inc., a luxury homebuilder, reported a surge in orders for new homes and a smaller loss in its latest quarterly report. The company said strength in orders was still holding up in May despite the end of the tax credit.

PulteGroup Inc., the nation’s largest homebuilder, reported in early May that it is expecting to be profitable this year after recording losses in 14 straight quarters.

The administration is also continuing efforts to use previously appropriated money to ease the foreclosure crisis.

The Housing and Urban Development Department recently announced an initiative to shift about $1 billion in funding to areas hardest hit by the collapse of the housing market for the redevelopment and resale of vacant homes.

Nonresidential construction rose 1.7 percent in April to an annual rate of $302.7 billion, the first improvement since March 2009. But that’s still off by 24.9 percent from April of 2009.

The uptick comes from increases in private-sector work on communications projects and power generation facilities, whereas commercial and school construction fell in April.
Government spending on construction increased 2.4 percent in April to $303.3 billion behind a 2.3 percent increase in spending, spurred by stimulus money from state and local governments.