Market Pulse for September 2015
Commentary and data supplied by Michael Neal, senior economist, National Association of Home Builders.
For questions on the Market Pulse section, contact Suzann Silverman at [email protected].
Building Materials: The price of inputs to construction fell by 3 percent on a not seasonally adjusted basis over the 12 months ending in May 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 2.9 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 1.9 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 3.8 percent, while the price of inputs to residential maintenance and repairs declined by 3.6 percent. Changes in the prices of individual building materials varied. The price of cement rose by 7.5 percent, the price of softwood plywood grew by 2.7 percent and the price of gypsum products increased by 3.3 percent. However, the price of oriented strand board (OSB) declined by 18 percent.
Multifamily Starts: Housing starts of buildings with five or more units, measured at a seasonally adjusted annual rate, declined by 18.5 percent over the month of May 2015 to 349,000. The decline in housing starts of buildings with five or more units that was recorded in May follows a 37.6 percent increase in the month of April. To smooth volatility in the data, a three-month moving average of the housing starts data is calculated. On a three-month moving average basis, housing starts of buildings with five or more units rose by 5.5 percent to 363,000, eclipsing its previous high of 360,000 set in September 2014. The dichotomy between the decline in actual housing starts of buildings with five or more units and the increase in the three-month moving average reflects the fact that the May level, 349,000, exceeded the February level, 292,000. The three-month moving average in April averages housing starts over the winter month of February and the spring months of March (311,000)and April (428,000). Meanwhile, the three-month moving average in May includes the spring months of March, April and May.
CPI vs. Rent: On a seasonally adjusted basis, the Consumer Price Index for Urban Consumers (CPI) increased by 0.4 percent over the month of May 2015. The month-over-month increase in the CPI partly reflected a reversal in the direction of energy prices. Over the month of April, energy prices fell by 1.3 percent, but in May, energy prices rose by 4.3 percent. For the second consecutive month, food prices were unchanged. Excluding energy and food prices, “Core-CPI” rose by 0.1 percent over the month. Shelter prices, which account for the largest portion of consumer expenditures, rose by 0.2 percent as rental prices 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 May. Over the year, the Real Rent Index grew 1.7 percent.
Existing Condo Sales and Prices: Existing condo and co-op sales, measured at a seasonally adjusted annual rate, rose by 1.6 percent over the month of May 2015 to 620,000. Regionally, growth in existing condo and co-op sales was confined to the Northeast, with 10 percent, and to the West, with 6.7 percent. Meanwhile, existing condo and co-op sales fell by 3.6 percent in the South and were unchanged in the Midwest. Although existing condo and co-op sales in the South declined by less than the monthly growth in both the Northeast and the West, the number of existing condo and co-op sales in the South, 270,000 on a seasonally adjusted annual rate basis in May, is equal to the number of existing condo and co-op sales in the Northeast and in the West combined. Meanwhile, the May 2015 existing condo and co-op inventory level, 256,000, was 0.4 percent less than the level recorded in April 2015, 257,000.
Source: Commentary and data supplied by Michael Neal, senior economist, National Association of Home Builders.
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.