January 2009 Market Pulse

Multifamily Starts: You have to go back to January 1994 to find 5+ multifamily starts numbers that are lower than those for November 2008. So the near-15-year boom cycle is clearly slamming to a halt—helped along by banks that are either refusing to make construction loans, calling loans on work in progress, or refusing to lend to consumers who want to buy condos…or all three. The problem with this scenario is that the pipeline for 5+ multifamily construction is quite long, and the industry may find itself with sharply restricted supply in three years.CPI vs. Rent: Preliminary numbers show that the overall Consumer Price Index is still dropping fairly significantly, at 3.6 percent. But rents are dropping much more slowly—just 1 percent. That would suggest that the current economic situation is less onerous for owners and managers of rentals—for the moment, at least. And if starts stay low in the near term, as it seems they will, buildings should remain fairly full, and rents should stay stable. Building Materials: Preliminary numbers for both softwood and plywood are continuing a downward trend, with last month’s softwood number being revised significantly lower—the negative 4.1 percent preliminary figure reported last issue is now final at a negative 7.5 percent. And this month’s preliminary number shows a drop of 2.6 percent beyond that. Cement prices continue to go up and down by small amounts, and gypsum prices are trending upward, with five of the last six months showing rises.To comment, contact Keat Foong at keat.foong@nielsen.com.