March 2017

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 buildings with five or more units, measured at a seasonally adjusted annual rate, fell by 6.1 percent over the month of March 2017 to 394,000, its third consecutive monthly decline. However, compared to the same month one year ago, starts of buildings with 5 or more units rose by 9.1 percent, its fourth consecutive annual increase.

Over the first three months of 2017, the seasonally adjusted annual rate of five or more unit building starts averaged approximately 407,000, 17 percent above its level in the first quarter of 2016. Comparing first quarter performances over the years, the average over the first quarter of 2017 has steadily climbed since the 82,000 starts recorded in the first quarter of 2010. The last time starts of buildings with five units or more was at or above 407,000 was in the first quarter of 1987 when there were an average of 447,000 starts over the first three months in that year.

CPI vs. Rent:

The headline consumer price index (CPI) fell by 0.3 percent in March 2017, reversing the 0.1 percent growth in February. This is the first monthly decline since February 2016. However, prices rose by 2.4 percent over the past year. The decrease in the CPI over the month partly reflected steeper declines in the trend of energy prices. After recording a 1 percent drop in prices over the month of February, the Energy Price Index fell by 3.2 percent in March. Meanwhile, food prices continued to accelerate, rising by 0.3 percent in March. Excluding historically volatile food and energy prices, “core” CPI fell by 0.1 percent although it rose by 2 percent over the past year. Growth in shelter prices slowed to 0.1 percent in March. Shelter prices are the largest consumer expenditure category. Rental prices, a component of the shelter index, grew by 0.3 percent in March. Since the increase in rental prices exceeded the negative growth in overall inflation, as measured by core-CPI, then NAHB’s Real Rent Index rose over the month, increasing by 0.4 percent. Over the past year, NAHB’s Real Rent Index rose by 1.8 percent.

Existing Condo Sales and Prices:

In March 2017, sales of existing condominiums and cooperatives rose by 5 percent to 630,000 units. Regionally, the 5 percent increase in condo and co-op sales nationwide reflected gains in the Midwest (12.5%), the Northeast (9.1%) and the South (7.7%). In contrast, sales in the South fell by 6.7 percent. The inventory of existing condos and co-ops rose by 5.2 percent in March. There are 222,000 condos and co-ops in inventory. Since the pace of sales growth was similar to 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, was unchanged at 4.2 months. Median prices on condos and co-ops nationwide rose by 8 percent over the past year to $224,700 in March.

Building Materials:

The price of inputs to construction rose by 3.5 percent on a not seasonally adjusted basis over the 12 months ending in March 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, non-residential and new residential construction (3.4%), maintenance and repairs construction (3.7%), non-residential maintenance and repairs (3.9%) and residential maintenance and repairs (3.3%). Meanwhile, the price of oriented strand board (OSB) grew by 24.9 percent over the past 12 months while the price of cement rose (4.8%), Gypsum (7.6%) and softwood plywood (1.2%).

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.