Market Pulse for May

Multifamily Starts:A hefty bounce in February dribbled back down in March to a seasonally adjusted annual rate of 152,000 units—about half of what has met the needs of the market in recent years. Even though there is still quite a bit of empty and foreclosed condo and single-family inventory, failure to start new communities is likely to result in a crunch down the road.CPI vs. Rent:The Consumer Price Index (CPI) fell one-tenth of one percent in March—the first time it recorded a decline on a year-over-year basis since 1958. The decline is primarily due to falling food and energy prices. Meanwhile, the rental component of the CPI rose two-tenths of one percent in March, and is up 3.2 percent from March 2008. The decline in the overall CPI while rents continue to rise is a welcome relief to building owners and managers whose margins had been squeezed by the sudden jump in energy prices.Interest Rates:Interest Rates and the 3-month LIBOR stayed remarkably stable throughout the first quarter of the year. Of course, generally low interest rates for investors and borrowers don’t mean a lot if there isn’t a lot of lending or investing going on. However, for those who can’t get financing, current interest rates are a real benefit.Building Materials:When the Bureau of Labor Statistics receives new information, it revises its various price indexes. This happened last month, resulting in new — but not terribly different — numbers for building materials prices from January 2008 going forward.  With the exception of cement, which has stayed relatively stable over the past eight months and rose by only a tenth of one percent in March, the other products tracked either stayed the same in March — gypsum didn’t budge — or fell in price. Softwood lumber showed a drop of 3.5 percent, and plywood dropped 1 percent. To comment, contact Keat Foong at