Market Pulse for July 2016

Market Pulse section compiled by Suzann Silverman. To comment, email ssilverman@cpexecutive.com.

Multifamily Starts:716_MP_starts

Housing starts of buildings with five or more units rose by 10.7 percent to a seasonally adjusted annual rate of 373,000. After averaging 343,000 on a seasonally adjusted annual rate over the first three months of the year, the number of these starts recorded in April is nearer to the levels recorded in both November 2015, 379,000, and December 2015, 378,000. Relative to all starts, single-family, two to four unit buildings, and five or more unit buildings, five or more unit buildings account for 32 percent of total housing starts. After falling to 29 percent in February 2016, starts of five or more unit buildings as a percentage of all housing starts have returned to the level last seen in November 2015. Meanwhile, NAHB’s Multifamily Production Index (MPI), increased one point to 53 in the first quarter of 2016, marking the 17th consecutive quarter in which the Index has been above its breakeven point of 50. A reading above 50 means that more builders and developers report that current conditions in the apartment and the condominium market are improving than report conditions are getting worse. Despite the small increase in the overall MPI, the first quarter reading is consistent with the NAHB’s expectation that the multifamily housing market is reaching equilibrium and will remain relatively stable through 2016.

716_MP_cpiCPI vs. Rent:

Consumer prices (CPI) overall, measured on a seasonally adjusted basis, rose by 0.4 percent in April 2016, 0.3 percentage point faster than its rate of growth in March. The acceleration in headline CPI partly reflected increases in energy and food prices. Energy prices grew by 3.4 percent in April, 2.5 percentage points faster than the 0.9 percent rate of growth recorded in March as the rate of growth in gasoline prices over the month of April, 8.1 percent was nearly 4 times its growth rate in March, 2.2 percent. Meanwhile, food prices, which fell by 0.2 percent in March, registered a 0.2 percent increase in April. Excluding the more volatile prices of energy and food, “core-CPI” rose by 0.2 percent over the month of April, 0.1 percentage point faster than the 0.1 percent rate of growth in March. Shelter prices, which account for the largest portion of consumer expenditures, rose by 0.3 percent in April, 0.1 percent percentage point faster than its growth rate in March, 0.2 percent. Rental prices, a component of overall shelter prices, grew by 0.3 percent over the month, in-line with the 0.3 percent rate of monthly growth experienced in January, February, and March. Since the increase in rental prices exceeded the monthly rise in overall inflation, as measured by core-CPI, then NAHB’s Real Rent Index rose, increasing by 0.2 percent over the month. More precisely, core-CPI grew by 0.195 percent and rental prices increased by 0.346 percent while the NAHB’s Real Rent Index rose by 0.151 percent. After falling to 1.3 percent in February 2016, the twelve-month percent change in the Real Rent Index reached 1.6 percent in April.

Existing Condo Sales and Prices:716_MP_condo

Following a 3.6 percent increase in March 2016, sales of existing condo and co-ops, measured on a seasonally adjusted annual rate, grew by 10.3 percent in April. The month-over-month increase in existing condo and co-op sales reflects growth in the South, 12.0 percent, the Midwest, 12.5 percent, and the West, 23.1 percent. However, sales in the Northeast fell by 8.3 percent over the month. In addition to nationwide growth in sales, the inventory of existing condo and co-ops also grew over the month. However, its rate of growth, 6.3 percent, lagged the percent increase in sales nationwide. There is an estimated 253,000 condos and co-ops in inventory. Since the pace of inventory growth was less than the rate of increase in sales, then the months’ supply, which represents the number of months it would take to exhaust the existing condo and co-op inventory at the current sales pace, fell, dropping 4.1 percent over the month to 4.7 months. Median existing condo and co-op sales prices rose by 6.8 percent on a not seasonally adjusted basis over the past year to $223,300.

716_MP_buildingBuilding Materials:

The price of inputs to construction fell by 1.7 percent on a not seasonally adjusted basis over the 12 months ending in April 2016. 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 1.6 percent. The price of inputs to new non-residential construction fell by 2.2 percent while the price of inputs to new residential construction dropped 1.0 percent. Meanwhile, the price of maintenance and repairs construction fell by 2.3 percent over the past year. The price of inputs to non-residential maintenance and repairs decreased by 2.5 percent while the price of inputs to residential maintenance and repairs declined by 1.9 percent. Twelve-month changes in the prices of individual building materials varied. The price of oriented strand board (OSB) grew by 18.1 percent, the price of cement rose by 4.1 percent, and gypsum prices increased by 3.0 percent. However, the price of softwood plywood declined by 13.5 percent.

716_MP_interest

 

 

 

 

 

 

Commentary and data were supplied by Michael Neal, a senior economist with the National Association of Home Builders (NAHB).

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.