Market Pulse for January 2018

A senior economist with the National Association of Home Builders (NAHB) supplied commentary and data about multifamily starts, price indices, existing condo sales and building materials.
Source: NAHB

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 rose by 37.4 percent at a seasonally adjusted annual rate in October 2017 to 393,000, after a 2.1 percent decline in September. Over the past 12 months, starts of five or more unit buildings declined by 12.1 percent in October, following the 7.9 percent increase in September.

NAHB’s Multifamily Production Index (MPI) weakened in the third quarter of 2017. The MPI measures builder and developer sentiment about current conditions in the multifamily market on a scale of zero 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 dropped 10 points to 46 in the third quarter of 2017, which is the lowest reading since the second quarter of 2011.

Source: NAHB

CPI vs. Rent:

The headline Consumer Price Index (CPI) rose by 0.1 percent in October on a seasonally adjusted basis. Over the month of October, the Energy Price Index declined by 1 percent, after a 6.1 percent increase in September. Meanwhile, food prices were unchanged over the month of October, after the 0.1 percent increase in September. Excluding historically volatile food and energy prices, “core” CPI rose by 0.2 percent, faster than the 0.1 percent increase in September. Shelter prices, which are the largest consumer expenditure category, grew by 0.3 percent as rental prices, a component of the shelter index, grew by 0.3 percent in October. Since the increase in rental prices was similar to the rate of growth in overall inflation, as measured by the core CPI, then NAHB’s Real Rent Index was unchanged over the month. Over the past year, NAHB’s Real Rent Index has risen by 1.9 percent.

Source: NAHB

Existing Condo Sales and Prices:

Sales of existing condominiums and cooperatives rose by 1.7 percent at a seasonally adjusted annual rate to 610,000 units in October 2017. Regionally, sales in the South rose by 4.2 percent, while sales in the Northeast, Midwest and West were unchanged. The months’ supply of homes decreased to 4 months, from 4.3 months in September. Median prices on condos and co-ops nationwide rose by 6.9 percent over the past year to $236,800 in October 2017. Median prices rose across the board, in the Northeast by 5.2 percent, Midwest (4.7%), South (2.7%) and West (11.1%).

Source: NAHB

Building Materials:

The price of inputs to construction rose by 3.9 percent on a not seasonally adjusted basis over the 12 months ending in October 2017. This component of the Producer Price Index is made up 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 3.9 percent, new non-residential construction (3.8%) and new residential construction (3.7%). The price of maintenance and repairs construction grew by 3.8 percent over the past year, non-residential maintenance and repairs (4.1%) and residential maintenance and repairs (3.9%). Meanwhile, the price of oriented strand board (OSB) grew by 16.9 percent, cement (4.5%), gypsum (8.7%) and softwood plywood (5.4%), over the past 12 months.

Source: NAHB

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.