Market Pulse for November 2015

Market Pulse section compiled by Suzann Silverman. To comment, email [email protected].

Multifamily Starts:

Housing starts of buildings with ve or more units, measured at a seasonally adjusted annual rate, fell by 17.1 percent to 413,000 over the month of July 2015. The monthly decline in these housing starts partly re ected a 4.6 percent upward revision to the number of five or more unit housing starts originally recorded in June; it was revised from 476,000 to 498,000 in July. In tandem with the monthly levels, the three-month moving average, used to smooth monthly data volatility, also fell, declining by 1.8 percent to 426,000 over the month of July. However, this is the second consecutive month that the three-month moving average of housing starts of buildings with five or more units eclipsed 400,000. Prior to June 2015, the last time the three-month moving average exceeded 400,000 was in November 1987.

CPI vs. Rent:

On a seasonally adjusted basis, growth in consumer prices specifically faced by urban consumers (CPI) slowed by 0.2 percentage points to 0.1 percent in the month of July. Energy prices, which rose by 1.7 percent in June, grew by only 0.1 percent in July. Meanwhile, food prices grew by 0.2 percent, 0.1 percentage point less than the 0.3 percent rate of growth in June. Excluding the more volatile energy and food prices, “core-CPI” rose by 0.1 percent, less than the 0.2 percent rate of growth recorded in June. However, shelter prices, which account for the largest portion of consumer expenditures, recorded faster growth over the month of July, at 0.4 percent, relative to their month-over-month rate of growth in June of 0.3 percent. Rental prices, a component of the overall Shelter Index, increased by 0.3 percent. Since rental prices rose faster than overall inflation, as measured by core-CPI, real rental prices also increased. NAHB’s Real Rent Index grew by 0.2 percent over the month of July 2015, while over the year, the Real Rent Index grew by 1.5 percent.

Existing Condo Sales and Prices:

Existing condo and co-op sales, measured at a seasonally adjusted annual rate, fell by 3.1 percent to 630,000 over the month of July. However, the decline in existing condo and co-op sales was confined to only one region of the country : the South. In the South, sales of existing condos and co-ops fell by 7.1 percent over the month. Elsewhere—including the Northeast, the Midwest and the West—existing condo and co-op sales were unchanged. Meanwhile, the July 2015 existing condo and co-op inventory level, at 271,000, was 9.7 percent greater than the level recorded in June of 247,000. Since the pace of sales over the month fell even as the inventory of existing condos and co-ops rose, 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, grew, rising by 13 percent over the month to 5.2 months. Median existing condo and co-op sales prices rose by 3.2 percent on a not seasonally adjusted basis over the past year, to $221,800.

Building Materials:

The price of inputs to construction fell by 3 percent on a not seasonally adjusted basis over the 12 months ending in July. 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 eased by 2.9 percent. The price of inputs to new non-residential construction fell by 3.9 percent, while the price of inputs to new residential construction dropped 2.1 percent. Meanwhile, the price of maintenance and repairs fell by 3.7 percent over the past year. The price of inputs to non-residential maintenance and repairs decreased by 3.9 percent, while the price of inputs to residential maintenance and repairs declined by 3.6 percent. Twelve-month changes in the prices of individual building materials varied. The price of cement rose by 7.4 percent. However, the price of softwood plywood declined by 4.3 percent, the price of gypsum products fell by 0.9 percent and the price of oriented strand board (OSB) declined by 9.2 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.