Trend May Not Hold

Interest rates: The rise in the LIBOR index reflects the constricted – nearly paralyzed – condition of bank lending at this time. The prime rate remained steady through September. The half-point rate emergency rate cut didn’t occur until October…and many expect another cut later this month. The brightest spot on the interest rate horizon is the continued healthy performance of 10-year Treasury notes – at least, it’s bright for those have them in their portfolios.Building Materials: Prices for three of the four construction materials we track – cement, gypsum, and softwood lumber – fell slightly last month. Plywood was the outlier, rising 2.1 percent. The rate for all materials has continued to rise, but more slowly than any previous month in 2008, at a 0.7 percent rate. Of course, inexpensive materials is no benefit if no one will lend you the money to get the project built.CPI vs. Rent: The rental segment of the Consumer Price Index continued to rise, but the rate of increase has barely risen at all this year. The drop in the total cost of living in September – mostly driven by falling gas prices – will probably continue to drop, as economic uncertainty leads to fewer and less expensive purchases, and prices become more competitive.Multifamily Starts: The pendulum of multifamily 5+ starts—way up in June and July, way down in August—is back at 254,000 units, consistent with the 200,000-250,000-unit range that NAHB is predicting through 2010. The lending bottleneck may result in lower numbers in the next quarter or two because of the lag time between when the rescue-plan capital began to enter the market, and the time it takes to lend it out.Commentary and Data Supplied by Dean Crist, Senior Economist, National Association of Home Builders (NAHB)To comment, contact Keat Foong at kfoong@multi-housingnews.com.