November 2016

Market Pulse section compiled by IvyLee Rosario. To comment, email ivylee.rosario@cpe-mhn.com.

Multifamily Starts:

According to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, starts of multifamily units, buildings with two or more units, fell significantly in November. Over the month, multifamily starts declined by 45.1 percent to a seasonally adjusted annual rate of 262,000. Over the past four months, starts of multifamily residential buildings have been volatile. Following a 38.4 percent drop over the month of September, multifamily starts rose by 76 percent in October. Regionally, the decline in multifamily starts was widespread. Starts in the Northeast fell by 52.1 percent in November, the West (22.1%), Midwest (14.2%) and the South (9.3%).

CPI vs. Rent:

After accelerating for three consecutive months, growth in the headline consumer price growth (CPI) slowed in November. Over the month of November 2016, the CPI increased by 0.2 percent, half the rate of growth in October. The slowdown in growth partly reflected a deceleration in energy prices. In November, energy prices grew by 1.2 percent, 2.3 percentage points less than its level in October. At the same time, the growth in shelter prices also slowed in November to 0.3 percent, from the 0.4 percent rate increase recorded in October. Rental prices, a component of overall shelter prices, also grew by 0.3 percent over the month, less than the 0.4 percent rate of growth in October. Despite a slowdown in growth of shelter and rental prices, core-CPI, which excludes energy and food prices, accelerated from 0.1 percent growth in October to 0.2 percent in November. Nevertheless, since the increase in rental prices exceeded the monthly rise in overall inflation, as measured by core-CPI, then NAHB’s Real Rent Index rose, increasing by 0.2 percent on a monthly basis. More precisely, rental prices grew by 0.35 percent over the month of November and core-CPI rose by 0.15 percent resulting in a 0.19 percent increase in NAHB’s Real Rent Index. Over the past 12 months, the Real Rent Index has risen by 1.7 percent.

Existing Condo Sales and Prices:

In November, sales of existing condos and cooperatives (co-ops), measured on a seasonally adjusted annual rate, rose by 10 percent in November to a seasonally adjusted annual rate of 660,000. Growth over the month was strongest in the Northeast at 16.7 percent, but both the South region (12.5%) and the West region (6.3%), also recorded month-over-month gains. Meanwhile, sales in the Midwest were unchanged over the month. The inventory of existing condos and co-ops fell by 7.8 percent over the month. There are 212,000 condos and co-ops in inventory. Since the pace of sales growth, which was positive, exceeded the rate of inventory growth, which was negative, then the months’ supply, which represents the number of months it would take to exhaust the existing condo and co-op inventory at the current sales pace, fell, dropping by 15.2 percent over the month to 3.9 months. Median existing condo and co-op sales prices rose by 5.8 percent on a not seasonally adjusted basis over the past year to $222,600.

Building Materials:

The price of inputs to construction rose by 0.8 percent on a not seasonally adjusted basis over the 12 months ending in November 2016. 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 0.9 percent. The price of inputs to new non-residential construction climbed 0.3 percent while the price of inputs to new residential construction rose by 1.3 percent. Meanwhile, the price of maintenance and repairs construction grew by 0.6 percent over the past year. The price of inputs to non-residential maintenance and repairs rose by 0.5 percent while the price of inputs to residential maintenance and repairs declined by increased by 0.9 percent. Twelve-month changes in the prices of individual building materials varied. The price of oriented strand board (OSB) grew by 12.4 percent, cement (6.2%) and gypsum (3.2%). However, the price of softwood plywood declined by 5.7 percent.

Commentary and data were supplied by Michael Neal, a senior economist with the National Association of Home Builders (NAHB).

Michael Neal is a senior economist with the National Association of Home Builders (NAHB). In this capacity, he monitors macroeconomic and financial issues that affect the U.S. and local housing markets. Prior to joining NAHB, he worked at the Joint Economic Committee of the U.S. Congress, the Federal Reserve, the Congressional Budget Office and Goldman, Sachs & Co.