August Market Pulse

Commentary and Data Supplied by Dean Crist, Senior Economist, National Association of Home Builders (NAHB)Multifamily Starts: Does the huge spike in multifamily starts signal a healthier development climate? Afraid not. The spike reflects a very large number of New York City projects that were started in June in order to avoid having to meet more stringent building code requirements that became effective in July. Once you factor out NYC, the starts picture remains pretty much the same, with an increase of less than 1 percent. Expect a steep drop in next month’s starts, when the projects that otherwise would have started in July aren’t there.Rent Changes: Both the Consumer Price Index and its rent component rose last month, but the overall CPI rose more sharply. This is the first rise in the rental section of the Index in more than a year. Since last November, CPI began rising faster than the rental component. As long as the rental numbers lag the overall Index, rents remain a relative bargain.Interest Rates: Ten-year Treasuries racheted up a notch, while the Prime Rate dropped and the LIBOR stayed relatively stable. But the rates won’t really matter to developers until lenders now sitting on the fence once again decide to make loans.Building Materials: Of the building materials tracked for MHN, only gypsum showed a slight price decline. Prices of other materials rose, with increases of less than 1 percent for cement and plywood, and not quite 2 percent for softwood lumber. This is consistent with the preliminary price numbers for all construction materials, which showed a 1.5 percent rise.Sources for Starts, Rent Changes, Interest Rates, Building Materials: National Association of Home Builders. To comment, contact Keat Foong at