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 rose by 2.6 percent at a seasonally adjusted annual rate in December 2017 to 352,000, after a 3.7 percent decline in November. Over the past 12 months, starts of five or more unit buildings decreased by 21.6 percent in December, following the 6.2 percent increase in November.
NAHB’s Multifamily Production Index (MPI) weakened in the third quarter of 2017. 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 10 points to 46 in the third quarter of 2017. This quarter marks the lowest MPI reading since the second quarter of 2011.
CPI vs. Rent:
The headline Consumer Price Index (CPI) rose by 0.1 percent in December on a seasonally adjusted basis. Over the month of December, the Energy Price Index decreased by 1.2 percent, after a 3.9 percent increase in November. Meanwhile, food prices rose by 0.1 percent in December. Excluding historically volatile food and energy prices, “core” CPI rose by 0.3 percent, faster than the 0.1 percent increase in November. Shelter prices, which are the largest consumer expenditure category, grew by 0.4 percent as rental prices, a component of the shelter index, grew by 0.4 percent in December. 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 of December, increasing by 0.1 percent. Over the past year, NAHB’s Real Rent Index has risen by 1.9 percent.
Existing Condo Sales and Prices:
Sales of existing condominiums and cooperatives declined by 11.6 percent at a seasonally adjusted annual rate to 610,000 units in December 2017. Regionally, sales in the Midwest were unchanged, while sales in the Northeast (14.3%), South (6.9%) and West (22.2%) declined. The months’ supply of homes was 3.4 months, unchanged from November. Median prices on condos and co-ops nationwide rose by 6.4 percent over the past year to $236,500 in December 2017. Median prices in the Northeast (5.7%), Midwest (4.4%), South (3.6%) and West (13.1%) increased.
The price of inputs to construction industries rose by 4.2 percent on a not seasonally adjusted basis over the 12 months ending in December 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 4.2 percent, inputs to new non-residential construction (4.3%), and inputs to new residential construction (4%). The price of maintenance and repairs construction grew by 4.2 percent over the past year, inputs to non-residential maintenance and repairs (4.4%) and inputs to residential maintenance and repairs (4.2%). Meanwhile, the price of oriented strand board (OSB) declined by 17.8 percent over the past 12 months while the price of cement rose by 4.6 percent, Gypsum (5.7%) and softwood plywood (24.3%) over the past 12 months.
Jing Fu, Ph.D. is a Senior Economist at NAHB. She monitors developments in the economy to identify trends and issues related to the housing industry. She also assists in forecasting and analyzing the state and metropolitan area housing market, producing research and articles detailing sectors and the geography of the home building industry. Prior to joining NAHB, Jing worked at Thomson Reuters as a data specialist and has extensive knowledge and experience on quantitative research and large data set analysis. She holds an M.A. and Ph.D. in Economics from the University of Kansas.