Market Pulse for October 2015

Market Pulse section compiled by Suzann Silverman. To comment, email ssilverman@cpexecutive.com.

(Click to enlarge charts.)

Multifamily Starts:

Housing starts of buildings with five or more units, measured at a seasonally adjusted annual rate, rose by 28.6 percent over the month of June 2015 to 476,000, accounting for 40.5 percent of total housing starts over the month. The increase in these housing starts over the month of June 2015 more than offset the 15.1 percent decline recorded in May 2015. As a result, the annual rate of housing starts of buildings with five or more units that took place in June 2015 now eclipses the previous post-recession high, 436,000, that was recorded in April 2015. The last time housing starts of buildings with five or more units reached or exceeded 476,000 was in November 1987. At the same time, the June 2015 level of housing starts of buildings with five or more units relative to total number of housing starts in June 2015, 40.5 percent, is also atypical. The last time housing starts of buildings with five or more units accounted for 40.5 percent or more of total housing starts was in June 1974.

CPI vs. Rent:

On a seasonally adjusted basis, the Consumer Price Index for Urban Consumers (CPI) increased by 0.3 percent over the month of June 2015. Over the previous 12 months, the CPI rose by 0.1 percent, its first 12-month increase since December 2014. The month-over-month increase in the CPI partly reflected energy prices. However, at 1.7 percent, the monthly rise in energy prices over June 2015 was less than its rate in May 2015, 4.3 percent. However, food prices rose by 0.3 percent over the month of June 2015 following two consecutive months where food prices were unchanged. The last time food prices rose by 0.3 percent or greater in a month was September 2014, when it rose by 0.3 percent. Excluding energy and food prices, “Core-CPI” rose by 0.2 percent over the month. Shelter prices, which account for the largest portion of consumer expenditures, rose by 0.3 percent as rental prices increased by 0.4 percent. Since rental prices rose faster than overall inflation, as measured by core-CPI, then real rental prices also increased. NAHB’s Real Rent Index grew by 0.2 percent over the month of June 2015. Over the year, the Real Rent Index grew by 1.7 percent.

Existing Condo Sales and Prices:

Existing condo and co-op sales, measured at a seasonally adjusted annual rate, rose by 6.6 percent over the month of June 2015 to 650,000. Regionally, growth in existing condo and co-op sales was widespread. Only condo and co-op sales in the Midwest remained unchanged over the month. Meanwhile, condo and co-op sales in the Northeast grew by 6.6 percent while sales in the South increased by 7.7 percent. Condo and co-op sales in the West rose by 6.3 percent. Meanwhile, the June 2015 existing condo and co-op inventory level, 250,000, was 1.6 percent less than the level recorded in May 2015, 254,000. Since the pace of sales over the month rose even as the inventory of existing condos and co-ops shrank, 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, declining by 8.0 percent over the month to 4.6 months. Median existing condo and co-op sales prices rose by 5.5 percent on a not seasonally adjusted basis over the past year to $226,500.

Building Materials:

The price of inputs to construction fell by 2.7 percent on a not seasonally adjusted basis over the 12 months ending in June 2015. 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 2.7 percent. The price of inputs to new non-residential construction fell by 3.6 percent while the price of inputs to new residential construction dropped 1.9 percent. Meanwhile, the price of maintenance and repairs fell by 3.5 percent over the past year. The price of inputs to non-residential maintenance and repairs decreased 3.7 percent while the price of inputs to residential maintenance and repairs declined by 3.2 percent. Twelve-month changes in the prices of individual building materials varied. The price of cement rose by 7.1 percent, and the price of softwood plywood grew by 0.8 percent. However the price of gypsum products fell by 0.1 percent and the price of oriented strand board (OSB) declined by 11.3 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.