Economy Watch: Apartment Starts Gain, Inflation Stays Low

Apartment starts gained 8.3 percent in July as a key consumer price index remained unchanged.

constructionThough some U.S. markets are facing a sizable number of apartment properties coming on line— especially in the upper price points in markets such as Seattle and Denver—overall the development of apartment product continues at a fairly strong pace, according to data released by the Census Bureau in its report on housing permits and starts on Tuesday.

In July, apartment starts gained 8.3 percent for the month, noted the bureau (which tracks buildings with more than five units as its multifamily category). Monthly figures in the multifamily sector tend to be volatile, so the more important metric is year-over-year. Compared with July 2015, apartment starts are up nationwide 15.2 percent.

That might represent the crest of a development wave, however. The bureau also reported that apartment development permitting—a leading indicator—was down 1.7 percent in July compared with a year earlier.

Separately on Tuesday, the Bureau of Labor Statistics reported that its Consumer Price Index for All Urban Consumers was unchanged in July. Over the last 12 months, the all-items index rose 0.8 percent. That’s reasonably good news for consumers—most things don’t cost much more than a year ago—but not necessarily good for retail landlords, since it’s harder to justify higher rents except for the most desirable properties.

The BLS’s energy index fell 1.6 percent after rising in each of the last four months, with the decline due to a sharp decrease in the price of gasoline; other energy prices were mixed. The price of food at home declined 0.2 percent as four of the six major grocery store food indexes decreased, while the index for food away from home rose 0.2 percent.