April 2017

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

Market Pulse section compiled by IvyLee Rosario. To comment, email [email protected].

717_MP_startsMultifamily 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, measured at a seasonally adjusted annual rate, fell by 9.6 percent over the month of April 2017 to 328,000, its fourth consecutive monthly decline. Starts in April 2017 are also 14.6 percent lower than its level from one year ago.

NAHB’s Multifamily Production Index (MPI) indicates that multifamily market conditions may be worsening. 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. The MPI dropped seven points to 48 in the first quarter of 2017. The last time the MPI had a reading below 50 was in the fourth quarter of 2011.

717_MP_cpiCPI vs. Rent:

The headline consumer price index (CPI) rose by 0.2 percent over the month of April, reversing the 0.3 percent decline that took place in March 2017. This is the first monthly decline since February 2016. The reversal partly reflects a changing trend in energy prices. Over the month of April, the Energy Price Index increased by 1.1 percent after falling by 3.2 percent in March. Meanwhile, food prices rose by 0.2 percent in April, 0.1 percentage point less than its level of growth in March. Excluding historically volatile food and energy prices, “core” CPI rose by 0.1 percent in April. 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 0.3 percent in March. Since the increase in rental prices exceeded the growth in overall inflation, as measured by core-CPI, then NAHB’s Real Rent Index rose over the month, increasing by 0.2 percent. Over the past year, NAHB’s Real Rent Index rose by 1.9 percent.

717_MP_condoExisting Condo Sales and Prices:

In April 2017, sales of existing condominiums and cooperatives fell by 1.6 percent to 620,000 units. Regionally, the 1.6 percent decline in condo and co-op sales nationwide reflected an 8.3 percent drop in the Northeast and a 3.6 percent fall in the South. Meanwhile, sales in the West rose by 7.1 percent while sales in the Midwest were unchanged. The inventory of existing condos and co-ops was also unchanged at 223,000 condos and co-ops. Since the pace of sales growth was less than the rate of inventory growth, 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, rose by 2.4 percent to 4.3 months. Median prices on condos and co-ops nationwide rose by 5.6 percent over the past year to $234,600 in April.

717_MP_buildingBuilding Materials:

The price of inputs to construction rose by 3.6 percent on a not seasonally adjusted basis over the 12 months ending in April 2017. 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 3.5 percent, inputs to new non-residential construction (3.5%), inputs to new residential construction (3.2%), maintenance and repairs construction (3.5%), inputs to non-residential maintenance and repairs (3.6%), and inputs to residential maintenance and repairs declined but increased by 3.4 percent. Meanwhile, the price of oriented strand board (OSB) grew by 25.5 percent over the past 12 months, cement (3.7%), Gypsum (7.4%), and softwood plywood (13.3%).

717_MP_interestMichael 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.

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