Market Pulse for April 2018

The price of inputs to construction industries rose by 4.3 percent on a not seasonally adjusted basis over the past 12 months ending in January 2018.

National Association of Home Builders by Jing Fu

Market Pulse section compiled by IvyLee Rosario. To comment, email ivylee.rosario@cpe-mhn.com.

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 19.7 percent at a seasonally adjusted annual rate in January 2018 to 431,000, after a 4.3 percent increase in December. Over the past 12 months, starts of five or more unit buildings rose by 3.1 percent in January, following the 19.8 percent decrease in December.

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 0 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. This quarter marks the lowest MPI reading since the second quarter of 2011.

CPI vs. Rent:

The headline Consumer Price Index (CPI) rose by 0.5 percent in January on a seasonally adjusted basis. In the first month of 2018, the Energy Price Index rose by 3.0 percent, after a 0.2 percent decrease in December, and food prices rose by 0.2 percent. Excluding historically volatile food and energy prices, “core” CPI rose by 0.3 percent, faster than the 0.2 percent increase in December. Shelter prices, which are the largest consumer expenditure category, grew by 0.2 percent as rental prices, a component of the shelter index, grew by 0.3 percent in January. Since the increase in rental prices is similar to the growth rate in overall inflation, as measured by core-CPI, then NAHB’s Real Rent Index was unchanged over the month of January. Over the past year, NAHB’s Real Rent Index has risen by 1.9 percent.

Existing Condo Sales and Prices:

Sales of existing condominiums and cooperatives rose by 1.6 percent at a seasonally adjusted annual rate to 620,000 units in the first month of 2018. Regionally, sales in the South increased by 3.7 percent, while sales in the Northeast, Midwest and West were unchanged. The months’ supply of homes was 3.0 months, less than 3.4 months in December. Median prices on condos and co-ops nationwide rose by 7.1 percent over the past year to $231,600 in January 2018. Median prices increased in the Northeast (10.4%), Midwest (5.1%), South (0.8%) and West (12.4%).

Building Materials:

The price of inputs to construction industries rose by 4.3 percent on a not seasonally adjusted basis over the past 12 months ending in January 2018. 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 increased by 4.3 percent, inputs to new non-residential construction (4.2%) and inputs to new residential construction (4.1%). The price of maintenance and repairs construction grew by 4.4 percent over the past year, non-residential maintenance and repairs (4.5%) and residential maintenance and repairs (4.3%). Meanwhile, the price of oriented strand board (OSB) rose by 0.4 percent, cement (3.1%), Gypsum (7%) and softwood plywood (25%) over the past 12 months.

Jing Fu, Ph.D. 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. and Ph.D. in Economics from the University of Kansas.