December 2018

Multifamily Starts:

According to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, starts of buildings with five or more units declined by 22.0 percent at a seasonally adjusted annual rate in December 2018 to 302,000 after a 18.3 percent increase in November. On a year-over-year basis, the December starts of five or more unit buildings were 15.9 percent below its December 2017 level.      

NAHB’s Multifamily Production Index (MPI) dropped one point to 47 in the fourth quarter of 2018. The MPI measures builder and developer sentiment about current conditions in the multifamily market on a scale of 0 to 100. The index is scaled so that a number above 50 indicates that more respondents report conditions are improving than report conditions are getting worse.

CPI vs. Rent:

The headline Consumer Price Index (CPI) has remained unchanged in December on a seasonally adjusted basis since October. Over the month of December, the Energy Price Index decreased by 2.6 percent, after a 2.8 percent decline in November, while food prices increased by 0.3 percent. Excluding historically volatile food and energy prices, “core” CPI rose by 0.2 percent, the same increase as last month. Shelter prices, which are the largest consumer expenditure category, grew by 0.3 percent as rental prices, a component of the shelter index, grew by 0.2 percent in December. Since the increase in rental prices is the same as the growth rate in overall inflation, as measured by core-CPI, then NAHB’s Real Rent Index was unchanged over the month of December. Over the past year, NAHB’s Real Rent Index has risen by 1.2 percent.

Existing Condo Sales and Prices:

Sales of existing condominiums and cooperatives decreased by 5.2 percent at a seasonally adjusted annual rate to 550,000 units in December. Regionally, sales decreased in the Midwest by 12.5 percent, South by 3.8 percent and West by 7.7 percent, while sales in the Northeast remained unchanged. The months’ supply of homes decreased to 4.1 months in December, from 4.3 months in November. Median prices on condos and co-ops nationwide increased by 2.4 percent over the past year to $240,900 in December. Median prices increased in the Northeast by 3.3 percent and South by 5.1 percent, while median prices decreased in the Midwest by 2.5 percent and in the West by 1.2 percent.

Building Materials:

The price of inputs to construction industries rose by 3.8 percent on a not seasonally adjusted basis over the past 12 months ending in December. This component of the Producer Price Index is composed of the price of inputs to new construction and the price of maintenance and repairs. Over the past year, the price of inputs to new construction increased by 3.8 percent, new non-residential construction climbed 4.0 percent and new residential construction rose by 3.8 percent. The price of maintenance and repairs construction grew by 3.6 percent over the past year. The price of inputs to non-residential maintenance and repairs rose by 3.7 percent, while the price of inputs to residential maintenance rose by 3.8 percent over the past year. Meanwhile, the price of oriented strand board (OSB) declined 12.9 percent, cement rose by 2.8 percent, Gypsum increased by 2.9 percent and the price of softwood plywood decreased 7.5 percent over the past 12 months.

Fan-Yu Kuo is an Economist at NAHB where she conducts economic research related to macroeconomics and forecasting. She also assists in economic and housing data updates. Prior to NAHB, Fan-Yu was a Research Assistant at the Academia Sinica. She holds an M.A. in International Economics and Finance from Johns Hopkins University and another M.A. in International Political Economy from King’s College London.