August 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 declined by 5.8 percent at a seasonally adjusted annual rate in August 2017 to 323,000, after a 3.1 percent decline in July. Over the past 12 months, starts of five or more unit buildings declined 23.1 percent in August, the sixth consecutive decline.

NAHB’s Multifamily Production Index (MPI) bounced back to trend in the second 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 climbed eight points to 56 in the second quarter of 2017. This quarter’s reading is the highest since the third quarter of 2015.

CPI vs. Rent:

The headline Consumer Price Index (CPI) rose 0.4 percent in August on a seasonally adjusted basis. Over the month of August, the Energy Price Index rose 2.8 percent, after the three consecutive declines from May to July. Meanwhile, food prices increased 0.1 percent in August, following the 0.2 percent increase in July. Excluding historically volatile food and energy prices, “core” CPI rose by 0.2 percent, faster than the 0.1 percent increase in July. Shelter prices, which are the largest consumer expenditure category, grew by 0.5 percent as rental prices, a component of the shelter index, grew by 0.4 percent in August. 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 August, increasing by 0.1 percent. Over the past year, NAHB’s Real Rent Index has risen by 2.2 percent.

Existing Condo Sales and Prices:

Sales of existing condominiums and cooperatives increased by 1.7 percent at a seasonally adjusted annual rate to 610,000 units in August 2017. Regionally, sales in the Northeast and Midwest rose by 20 percent and 14.3 percent, respectively. Sales in the South were unchanged. Meanwhile, sales in the West declined by 12.5 percent. The months’ supply of homes decreased to 4.3 months, from 4.6 months in July. Median prices on condos and co-ops nationwide rose by 5.4 percent over the past year to $237,600 in August. Median prices increased in the Northeast by 4.6 percent, Midwest (5.9%), South (5.8 percent) and West (5.6%).

Building Materials:

The price of inputs to construction rose by 3.2 percent on a not seasonally adjusted basis over the twelve months ending in August 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 3.2 percent. The price of inputs to new non-residential construction climbed 3.2 percent while the price of inputs to new residential construction rose by 3 percent. The price of maintenance and repairs construction grew by 3.2 percent over the past year. The price of inputs to non-residential maintenance and repairs rose by 3.5 percent while the price of inputs to residential maintenance and repairs increased by 3.2 percent. Meanwhile, the price of oriented strand board (OSB) grew by 13.3 percent, cement (4.8%), Gypsum (8.4%) and softwood plywood (4.1%) over the past 12 months.

Jing Fu 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. in Economics from the University of Kansas and is currently completing the requirements for her Ph.D.