16 June 2014 | Multi-Housing News

Per

cent

age

Cha

nge

Mon

th-o

ver-

Mon

th

Dec. ’13 Jan. ’14 Feb. ’14-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

Cement

Gypsum

Softwood Lumber

Plywood

Steel

-0.1

-1.3-2.8

2.2

0.3

2.0

3.1

4.1

2.2

0.9 0.70.4

-0.8

1.2

7.4

0.6

0.7

0.8

0.9

1.0

Ind

exApr.May

’13Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan.

’14Feb. Mar.

0.82

0.88

Building Materials: Seasonally adjusted prices of the inputs to residen-tial construction rose by 0.7 percent over the month of February 2014, matching the rate of growth that took place in January 2014. However, changes across individual building materials prices were mixed. Prices of plywood rose by 0.9 percent in February 2014 while gypsum prices in-creased by 4.1 percent. In contrast, prices of both oriented strand board (OSB) and cement declined over the month. In February 2014, OSB pric-es fell by 0.7 percent, while cement prices declined by 0.8 percent.

NAHB/First American Leading Markets Index*

Multifamily Starts: In February 2014, housing starts of buildings with five or more units fell by 2.5 percent on a month-over-month basis to a seasonally adjusted annual rate of 312,000 units. The February 2014 reading of five or more unit housing starts represents the third consecu-tive month-over-month decline. Over this three-month period, hous-ing starts of buildings with five or more units fell by 17.7 percent. The extended decrease in housing starts of buildings with 5 or more units led to the first decline in a measure of the underlying trend since the summer of 2013. Despite this month-over-month decrease in the un-derlying trend, housing starts of buildings with five or more units are still hovering near the average level during a period considered normal. On a three-month moving average basis, which smoothes the month-over-month volatility of the data, housing starts of buildings with five or more units fell by 6.5 percent in February 2014. The last decline in the three-month moving average took place in August 2013. However, the seasonally adjusted annual rate of 312,000 housing starts of buildings with five or more units exceeds the average level recorded between 2000 and 2003 by 2.4 percent.

news & notes

Market PulseMarket Pulse section compiled by Keat Foong, executive editor. To comment, email kfoong@multi-housingnews.com.

200,000

250,000

300,000

350,000

400,000

Uni

ts

May Jun. Aug. Sep.Jul. Oct. Nov. Dec. Jan.’14

Feb.Mar.’13

Apr.

356,000

312,000

Multifamily Starts

Building Materials

MHN ONLINE

For more market statistics and reports, visit www.multi-housingnews.com

* An index value above 1.0 indicates the market has advanced beyond the previous sustainable level of economic activity.

www.multi-housingnews.com | June 2014 17

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

May Jun. Aug. Sep. Oct. Nov. Dec. Feb.Jan.’14

Mar.’13

Apr. Jul.

3-Month Libor0.28%

3-Month Libor0.24%

10-Year Treasury1.96%

Prime Rate 3.25%

10-YearTreasury

2.71%

Prime Rate3.25%

Source: Commentary and Data supplied by Michael Neal, senior economist, National Association of Home Builders.

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

Per

cent

age

Cha

nge

Mon

th-o

ver-

Mon

th

May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan.’14

Feb.Mar.’13

Apr.

Rent 3.0%

CPI -2.7%

Rent2.3%

CPI1.2%

$160,000

$180,000

$200,000

$220,000

Pric

e

Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan.’14

Feb.Mar.’13

$180,000

$187,900

CPI vs. Rent: The seasonally adjusted Consumer Price Index – Urban Consumer (CPI) rose by 0.1 percent in February 2014. Energy prices fell over the month by 0.5 percent as the 1.7 percent decline in the price of gasoline helped to offset the 4.1 percent increase in fuel oil prices. As of January 2014, fuel oil accounted for 0.2 percent of consumer expendi-tures while gasoline represented 5.0 percent of consumer expenditures. Meanwhile, food prices rose by 0.4 percent over the month of Febru-ary 2014. Core-CPI, which excludes the more volatile energy and food prices, also rose by 0.1 percent over the month. Shelter prices, which represent the largest portion of total consumer expenditures, grew by 0.2 percent over the month. Rental prices, a component of shelter, in-creased by 0.2 percent in February 2014. Since the growth rate in rental prices exceeded inflation, then real rental prices also rose. NAHB’s Real Rent Index increased by 0.1 percent in February 2014. This is the 13th consecutive monthly increase in NAHB’s Real Rent Index. Over this pe-riod, real rents have risen by 1.3 percent.

Existing Condo Sales and Prices: The seasonally adjusted annual rate of existing condo and co-op sales fell by 1.8 percent over the month of February 2014 to 560,000 units. Regionally, the decline in ex-isting condo and co-op sales was isolated to the South, where condo and co-op sales fell by 3.7 percent over the month. Existing condo and co-op sales in the other three regions of the country were unchanged. In contrast, the condo and co-op inventory rose by 30.7 percent over the month to a seasonally adjusted annual rate of 268,000 units. As a result of a declining sales pace and an expanding inventory, the months’ supply, which represents the number of months it would take to ex-haust the condo and co-op inventory at the current sales pace, rose by 32.6 percent in February 2014 to 5.7 months. Existing condo and co-op sales prices, measured on a not seasonally adjusted basis, rose by 9.8 percent over the past 12 months.

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 join-ing NAHB, he worked at the Joint Economic Committee of the U.S. Congress, the Federal Reserve, the Con-gressional Budget Office and Goldman, Sachs & Co.

CPI vs. Rent Existing Condo Median Sales Price

Interest Rates

18 June 2014 | Multi-Housing News

news & notes

Unemployment RateSeasonally adjusted, 16 years and over

Source: U.S. Bureau of Labor Statistics

6.0%

7.0%

8.0%

9.0%

Apr. May Jul.Jun. Sep.Aug. Oct.

6.7% 6.7%

Nov. Dec.Mar. Mar.Feb.Jan.2013 2014

Per

cent

age

of

Une

mp

loye

d

Apartment Equity REITs PerformancePeriod to Date Performance (%)

Dividend Yield (4-9-14) Price Return (4-9-14) 3.59 -0.31 Total Returns (as of 4-9-14) 4-9-14 Q-T-D Y-T-D -0.31 1.17 15.17

Compound Annual Total Returns Through Prior Month’s Close

1-Year 5-Year 10-Year 6.66% 29.43% 11.30%

Source: National Association of Real Estate Investment Trusts

Multifamily Default Rates for BanksDefaults on Commercial Real Estate Mortgages Held by Depository Institutions

Sources: FDIC, Back Call Reports, Chandan Economics

The American banking system reached another recovery milestone during the fourth quarter, pushing net commercial real estate lending to its highest level on record.• Delinquency and Default. The default rate on commercial and apartment mortgages held by banks declined to 1.7 percent in the fourth quarter, the lowest level in five years. Excluding apartments, the commercial default rate fell to 1.9 percent, also at a five year low. The apartment default rate, which had exceeded the commercial default rate at its peak four years ago, is now below 1 percent. Along its current trajectory, it will fall to within a long-term structural range centered about 0.5 percent by the end of 2014.

• New Lending. The balance of commercial mortgage held by banks increased to $1.1 trillion in the fourth quarter, its highest level on record, up $17 billion from the prior quarter and $36 billion from a year earlier. Across

commercial and multifamily mortgages, net lending has increased by nearly $65 billion over the last year. Higher lending volumes have been an important contributor to lower default rates, which reflect the dilution of legacy pre-crisis loans as well as write-downs and troubled debt restructurings.

• Construction Financing. Small residential properties account for just over 20 percent of bank construction lending. Net lending on all other projects, including multifamily and commercial real estate, has increased for three consecutive quarters, by $5.4 billion. Loan-to-cost ratios have trended only slightly higher but understate banks’ exposure because of rising construction costs.

—Sam Chandan, Chief Economist, Chandan Economics

0%

1%

2%

3%

4%

5%Commercial

Q1’12

Q2 Q2Q3 Q4 Q3 Q4 Q1’13

Q2 Q4Q3Q4’10

Q1’11

0.83

%1.

90%

0.96

%2.

18%

Multifamily Commercial Multifamily

2010Q1 4.20% 4.65%Q2 4.30 4.56Q3 4.35 4.71Q4 4.29 3.78

2011Q1 4.31% 3.67%Q2 4.08 3.34Q3 3.95 2.91Q4 3.80 2.53

2012Q1 3.68% 2.36%Q2 3.36 2.04Q3 3.17 1.84Q4 2.85 1.54

2013Q1 2.67% 1.34%Q2 2.41 1.13Q3 2.18 0.96Q4 1.90 0.83

Market Pulse section compiled by Keat Foong, executive editor. To comment, email kfoong@multi-housingnews.com.

Top 10 Multifamily Sales: New York CityMarch 2014 to April 2014

Source: PropertyShark

ADDRESS BOROUGH SALE PRICE SALE DATE

72-76 Seventh Ave. Manhattan $78,500,000 21-Mar-14

261 West 25th St. Manhattan $34,942,279 25-Mar-14

88-15 168th St. Queens $27,400,00 3-Apr-14

111-32 76th Ave. Queens $21,649,329 28-Mar-14

49-15 Skillman Ave. Queens $19,921,991 2-Apr-14

47 West 70th St. Manhattan $19,272,315 1-Apr-14

46-15 Skillman Ave. Queens $17,849,183 2-Apr-14

43-31 45th St. Queens $17,158,247 2-Apr-14

2283-2287 Third Ave. Manhattan $17,000,000 13-Mar-14

222 West 21st St. Manhattan $16,750,000 26-Mar-14

R E C E N T M U L T I F A M I L Y T R A N S A C T I O N S

northmarq.com

$27,000,00012 Central Apartments

SIZE: 204 UNITS CITY: BELLEVUE, WALENDER: FREDDIE MAC

$20,500,000Pacific Terrace

SIZE: 41 UNITS CITY: SAN FRANCISCO, CA LENDER: LIFE COMPANY

34 OFFICES COAST-TO-COAST | 952.356.0080

$26,300,000West Run Apartments

SIZE: 322 UNITS CITY: MORGANTOWN, WV LENDER: CMBS