Market Pulse for May 2016

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

Multifamily Starts:516_MP_starts

After two consecutive months of declines, housing starts of buildings with five or more units rose in February 2016. On a seasonally adjusted annual rate basis, housing starts of buildings with five or more units increased by 2.4 percent over the month of February. Over the past 12 months, housing starts of buildings with five or more units climbed 16.8 percent, reversing the 12-month decline of 9.5 percent witnessed in January. Despite the increase over the past 12 months in housing starts of buildings with five or more units, single-family housing starts rose even more, increasing by 37.0 percent over the past year. This is the fourth month in the last five, dating back to October 2015, that year-over-year growth in single-family housing starts has eclipsed the rate of increase in five or more unit starts. Between October 2015 and February 2016, the 12-month growth rates in single-family housing starts were 1.4 percent, 17.3 percent, 6.2 percent, 8.6 percent and 37.0 percent, respectively. Meanwhile, for housing starts of buildings with five or more units the annual growth rates were -3.6 percent, 17.1 percent, 11.0 percent, -9.5 percent and 16.8 percent, respectively.

516_MP_cpiCPI vs. Rent:

Consumer prices (CPI) overall, measured on a seasonally adjusted basis, slid 0.2 percent over the month of February 2016. The decline in the overall basket of urban consumer prices largely reflected lower energy prices. Over the month of February, the energy price index dropped 6.0 percent as gasoline prices fell 13.0 percent. Meanwhile, food prices rose by 0.2 percent. Excluding the more volatile prices of energy and food, “core-CPI” rose by 0.3 percent over the month of February, similar to its monthly rate of growth in January. Growth in core-CPI partly reflected an increase in shelter prices. Shelter prices, which account for the largest portion of consumer expenditures, rose by 0.3 percent in February, matching its growth rate in January. 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. Since the increase in rental prices matched the monthly rise in overall inflation, as measured by core-CPI, then NAHB’s Real Rent Index was unchanged, for the second consecutive month, in February. Over the past year, the Real Rent Index is up by 1.3 percent. Since reaching a 12-month growth rate of 1.8 percent in October 2015, the annual pace of growth in NAHB’s Real Rent Index has steadily slowed in each successive month.

Existing Condo Sales and Prices:516_MP_condo

Existing condo and co-op sales, measured at a seasonally adjusted annual rate, fell by 6.6 percent over the month of February 2016 to 570,000. Since reaching, for the third time since the end of the last recession, a peak of 640,000 in December 2015, existing condo and co-op sales have fallen by 10.9 percent. The month-over-month decrease in existing condo and co-op sales reflects declines in the Northeast, 16.7 percent, the South, 3.8 percent and the West, 6.7 percent. Sales in the Midwest were unchanged over the month. While sales of existing condos and co-ops fell over the month, the inventory rose. In February 2016, the inventory of existing condo and co-ops grew by 14.8 percent to 225,000. Since the pace of sales fell while the inventory of existing condos and co-ops expanded, 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, rose, climbing by 20.5 percent over the month to 4.7 months. Median existing condo and co-op sales prices rose by 5.1 percent on a not seasonally adjusted basis over the past year to $198,900.

516_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 February 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 2.4 percent while the price of inputs to new residential construction dropped 1.1 percent. Meanwhile, the price of maintenance and repairs construction fell by 2.4 percent over the past year. The price of inputs to non-residential maintenance and repairs decreased by 2.7 percent while the price of inputs to residential maintenance and repairs declined by 1.6 percent. Twelve-month changes in the prices of individual building materials varied. The price of cement rose by 4.2 percent and the price of oriented strand board (OSB) grew by 9.6 percent. However the price of softwood plywood declined by 13.7 percent and the price of gypsum fell by 4.9 percent.

516_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.