Concrete Products Lead Building Materials Prices Higher

2023-03-15T12:19:54-05:00

After four consecutive declines, the producer price index (PPI) for inputs to residential construction less energy (i.e., building materials) rose 0.3% in February 2023 (not seasonally adjusted) follow a 1.1% increase in January (revised), according to the latest PPI report. Price growth of goods inputs to residential construction, including energy, gained 0.4% over the month. Prices have increased 2.9% over the past 12 months. Ready-Mix Concrete The trend of ready-mix concrete (RMC) prices continued its historic pace as the index increased 0.8% in February after gaining 0.7% in January (revised).  RMC prices have increase in all but two months since January 2021. The monthly increase in the national data was broad-based geographically but was primarily driven by a 4.2% increase in the Northeast. Prices 0.8% in the West, 0.5% in the South, and were unchanged in the Midwest. Softwood Lumber The PPI for softwood lumber (seasonally adjusted) fell 0.8% in February–the seventh consecutive monthly decline. Since peaking in March 2022, the index has fallen by nearly half (-47.1%) but is still nearly 20% above the January 2020 level. Gypsum Building Materials The PPI for gypsum building materials climbed 0.5% in February after edging down very slightly the month prior. Gypsum products prices are 12.5% higher than they were a year ago but began stabilizing in August 2022. Prices have been stable—up just 0.7%–in the six months since. Steel Mill Products Steel mill products prices increased 2.6% in February, more than offsetting the 2.4% decline seen the month prior. This was the first monthly price increase since May 2022. Even so, prices have dropped 26.0% since May 2022 and are down 21.2% over the past 12 months. Services The price index of services inputs to residential construction rose 0.2% in February following a 0.7% increase in January. Prices have declined 7.7% over the past year despite increasing in four of the past five months. Transportation of Freight The price of truck, deep sea (i.e., ocean), and rail transportation of freight decreased 0.8%, 0.5% and 1.1%, respectively, in February. Of the three modes of shipping, trucking prices have exhibited the largest slowdown since early 2022. Related ‹ Builder Confidence Edges Higher in March but Future Outlook UncertainTags: Building Materials, building materials prices, construction costs, Gypsum, inflation, lumber, ppi, producer price index, ready-mix concrete, softwood lumber, steel

Concrete Products Lead Building Materials Prices Higher2023-03-15T12:19:54-05:00

Inflation Eased Despite Sticky Housing Costs

2023-03-14T12:23:13-05:00

By Fan-Yu Kuo on March 14, 2023 • Consumer prices in February saw the smallest year-over-year gain since September 2021 with an eighth consecutive month of a deceleration. However, the shelter index (housing inflation) continued to rise at an accelerated pace and was the largest contributor to the total increase, accounting for over 70% of the increase. Shelter inflation is a lagging indicator and will primarily be cooled in the future via additional housing supply. Real-time data from private data providers indicate that rent growth is cooling, and this is not yet reflected in the CPI data. It will be reflected in the coming months. The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) rose by 0.4% in February on a seasonally adjusted basis, following an increase of 0.5% in January. The price index for a broad set of energy sources fell by 0.6% in February as a decline in natural gas (-8.0%) and fuel oil (-7.9%) offset an increase in gasoline (+1.0%) and electricity index (0.5%).  Excluding the volatile food and energy components, the “core” CPI rose by 0.5% in February, following an increase of 0.4% in January. Meanwhile, the food index increased by 0.4% in February with the food at home index rising 0.3%. Most component indexes continued to increase in February. The indexes for shelter (+0.8%), recreation (+0.9%), airline fares (+6.4%) as well as household furnishings and operations (+0.8%) showed sizeable monthly increases in February. Meanwhile, the indexes for used cars and trucks (-2.8%) and medical care (-0.5%) declined in February. The index for shelter, which makes up more than 40% of the “core” CPI, rose by 0.8% in February, following an increase of 0.7% in January. The indexes for owners’ equivalent rent (OER) increased by 0.7% and rent of primary residence (RPR) increased by 0.8% over the month. Monthly increases in OER have averaged 0.7% over the last three months. These gains have been the largest contributors to headline inflation in recent months. These higher housing costs are driven by lack of attainable supply and higher development costs. Higher interest rates will not slow these costs, which means the Fed’s tools are limited in addressing shelter inflation. During the past twelve months, on a not seasonally adjusted basis, the CPI rose by 6.0% in February, following a 6.4% increase in January. This was the slowest annual gain since September 2021. The “core” CPI increased by 5.5% over the past twelve months, following a 5.6% increase in January. The food index rose by 9.5% and the energy index climbed by 5.2% over the past twelve months. NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than overall inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster (slower) than overall inflation, the real rent index rises (declines). The real rent index is calculated by dividing the price index for rent by the core CPI (to exclude the volatile food and energy components). The Real Rent Index rose by 0.3% in February. Related ‹ Permits Decline At The Start of 2023Tags: cpi, inflation

Inflation Eased Despite Sticky Housing Costs2023-03-14T12:23:13-05:00

Building Materials Prices Increase in January Reversing Four-Month Trend

2023-02-16T18:16:47-06:00

By David Logan on February 16, 2023 • After four consecutive declines, the producer price index (PPI) for inputs to residential construction less energy (i.e. building materials) rose 0.9% in January 2023 (not seasonally adjusted) according to the latest PPI report. Price growth of goods inputs to residential construction, including energy, gained 1.4% over the month. Prices have increased 5.1% over the past 12 months. Ready-Mix Concrete The trend of ready-mix concrete (RMC) prices continued its historic pace as the index increased 0.9% in January after surging 13.6% in 2022.  RMC prices have increase in all but two months since January 2021. Gypsum Building Materials The PPI for gypsum building materials was unchanged in January, following a 0.2% decline in December 2022. Gypsum products prices are 11.1% higher than they were a year ago but began stabilizing in August 2022. In the five months since, prices have been essentially unchanged. Softwood Lumber The PPI for softwood lumber (seasonally adjusted) fell 7.6%–the sixth straight monthly decline. Over that period, the index has decreased 23.3%. Steel Mill Products Steel mill products prices decreased 2.3% in January after falling 3.3% in December 2022. Although the pace of declines has slowed, prices have dropped 27.8% since May 2022 and are down 30.1% over the past 12 months. Related ‹ Single-Family Built-for-Rent Growth Strong in 2022Tags: construction costs, Gypsum, inflation, lumber, ppi, producer price index, producer prices, ready-mix concrete, softwood lumber, steel

Building Materials Prices Increase in January Reversing Four-Month Trend2023-02-16T18:16:47-06:00

Slow Progress for Inflation

2023-02-14T10:20:44-06:00

Consumer prices in January saw the smallest year-over-year gain since October 2021 with a seventh consecutive month of a deceleration. However, this disinflation pace was much slower than expected, partially because new methodology introduces higher weights for shelter and lower weights for food and energy to reflect changes in consumer spending in 2021. The shelter index (housing inflation) continued to rise at an accelerated pace and was the largest contributor to the total increase. Shelter inflation will primarily be cooled in the future via additional housing supply. While inflation appears to have peaked and continues to slow, inflation in core service (excluding shelter) has not begun to ease. However, real-time data from private data providers indicate that rent growth is cooling, and this is not yet reflected in the CPI data. It will be reflected in the coming months. The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) rose by 0.5% in January on a seasonally adjusted basis, following an increase of 0.1% in December. The price index for a broad set of energy sources grew by 2.0% in January as the gasoline index (+2.4%), the natural gas index (+6.7%) and the electricity index (+0.5%) all increased.  Excluding the volatile food and energy components, the “core” CPI rose by 0.4% in December, unchanged from last month. Meanwhile, the food index increased by 0.5% in January with the food at home index rising 0.4%. Most component indexes continued to increase in January. The indexes for shelter (+0.7%), motor vehicle insurance (+1.4%), recreation (+0.5%), apparel (+0.8%) as well as household furnishings and operations (+0.3%) showed sizeable monthly increases in January. Meanwhile, the indexes for used cars and trucks (-1.9%), medical care (-0.4%) and airline fares (-2.1%) declined in January. The index for shelter, which makes up more than 40% of the “core” CPI, rose by 0.7% in January, following an increase of 0.8% in December. Both the indexes for owners’ equivalent rent (OER) and rent of primary residence (RPR) increased by 0.7% over the month. Monthly increases in OER have averaged 0.7% over the last three months. These gains have been the largest contributors to headline inflation in recent months. These higher housing costs are driven by lack of attainable supply and higher development costs. Higher interest rates will not slow these costs, which means the Fed’s tools are limited in addressing shelter inflation. During the past twelve months, on a not seasonally adjusted basis, the CPI rose by 6.4% in January, following a 6.5% increase in December. This was the slowest annual gain since October 2021. The “core” CPI increased by 5.6% over the past twelve months, following a 5.7% increase in December. The food index rose by 10.1% and the energy index climbed by 8.7% over the past twelve months. NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than overall inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster (slower) than overall inflation, the real rent index rises (declines). The real rent index is calculated by dividing the price index for rent by the core CPI (to exclude the volatile food and energy components). The Real Rent Index rose by 0.3% in January. Related ‹ Single-Family Permits Declined 2022Tags: BLS, consumer spending, cpi, inflation

Slow Progress for Inflation2023-02-14T10:20:44-06:00

Materials Remain Builders’ Top Challenge, but Inflation and Interest Rates are Threatening

2023-02-13T09:19:33-06:00

By Ashok Chaluvadi on February 13, 2023 • The price and availability of building materials again topped the list of problems builders faced last year, while interest rates (along with general inflation and negative media reports) moved considerably up the list.  According to special questions on the January 2023 survey for the NAHB/Wells Fargo Housing Market Index, building material prices were a significant issue for 96% of builders in 2022. The second most widespread problem in 2022 was availability/time it takes to obtain building materials, cited by 86% of builders.  These were the same two problems that topped the list in 2021.  Cost and availability of labor has also been a relatively widespread problem, reported as a significant by 82% of builders in 2021 and 85% in 2022, a result that is not surprising given the large number of unfilled job openings in the construction industry. Compared to 2021, some of the problems became significantly more widespread in 2022. High interest rates were a problem for only 2% of builders in 2021, but this increased to 66% in 2022. Rising inflation in the US economy was a significant problem for 63% of builders in 2021, compared to 85% in 2022.  And 26 percent of builders said negative media reports making buyers cautious was a significant problem in 2021, compared to 55 percent in 2021. Even more builders—a full 93%—expect high interest rates to be a problem in 2023, up strongly from the 66% who said it was a problem in 2022.  Moreover, both the current and expected numbers were much higher in the recent survey than at any time in the 2011-2021 span. Compared to the supply-side problems of materials and labor, problems attracting buyers have not been as widespread, but builders expect many of them to become more of a problem in 2023. Negative media reports making buyers caution was a significant problem for 55% of builders in 2022, but 79% expect them to be a problem in 2023. Buyers expecting prices or interest rates to decline if they wait was a significant problem for 49% of builders in 2022, compared to 80% who expected it to be an issue in 2023. Concern about employment/economic situation was a problem for only 41% of builders in 2022, but 73% expect it to be a problem in 2023. Gridlock/uncertainty in Washington making buyers cautious was a significant problem for 38% of builders in 2022, compared to 54% who expected it to be a problem in 2023. Finally, buyers unable to sell their existing homes was a significant problem for only 13% of builders in 2022, but 52% expect it to be a problem in 2023. For additional details, including a complete history for each reported and expected problem listed in the survey, please consult the full HMI January2023 Special Survey REPORT. Related ‹ Loan Demand Declines as Credit Standards Tighten in Q4 2022Tags: Building Materials, economics, eye on the economy, home building, housing trends report, inflation, interest rates, single-family

Materials Remain Builders’ Top Challenge, but Inflation and Interest Rates are Threatening2023-02-13T09:19:33-06:00

OMB Proposes Standards on Building Materials Made in America

2023-02-10T12:23:37-06:00

The Office of Management and Budget (OMB) has proposed new standards to determine if construction materials for federally funded infrastructure projects are made in the USA.  The new guidance, required by the Infrastructure Investment and Jobs Act—also known as the Bipartisan Infrastructure Law (BIL)—“sets standards to carry out the statutory requirement that all manufacturing processes for construction material occur in the United States.” Federally funded infrastructure projects include housing development that receives any federal support such as through the CDBG and HOME programs. Covered Construction Materials and Manufacturing Standards The Build America, Buy America Act (BABA)—part of the BIL—requires that OMB issue standards that define ‘‘all manufacturing processes’’ in the case of construction materials. Initial guidance (memorandum M–22–11) issued in April 2022 fell short of this and instead provided non-binding guidance on the definition of construction materials. The latest proposal includes an expanded list of products considered construction materials and proposes standards for ‘‘all manufacturing processes’’ for the manufacture of construction materials. Among construction materials covered by the guidance are lumber, drywall, glass, and plastics. The guidance includes domestic manufacturing process standards for the following construction materials. Defining Infrastructure According to OMB, infrastructure includes roads, highways, and bridges; water systems, including drinking water and wastewater systems; electrical transmission facilities and systems; utilities; broadband infrastructure; and buildings and real property. OMB instructs Federal awarding agencies to interpret the term ‘‘infrastructure’’ broadly and consider the description provided in paragraph (c) of this section as illustrative and not exhaustive. However, OMB then directs agencies to consider certain criteria when determining if a particular project constitutes ‘‘infrastructure.’’ These include whether the project will serve a public function, including whether the project is publicly owned and operated, privately operated on behalf of the public, or is a place of public accommodation, as opposed to a project that is privately owned and not open to the public. Waivers and Exemptions A Federal awarding agency may issue a waiver to the application of the Buy America Preference. The agency notes three types of waivers: Public Interest Waiver: May be applied if the Buy America Preference would be inconsistent with the public interest. Nonavailability Waiver: May be applied if types of iron, steel, manufactured products, or construction materials are not produced in the United States in sufficient and reasonably available quantities or of a satisfactory quality Unreasonable Cost Waiver: May be applied if the inclusion of iron, steel, manufactured products, or construction materials produced in the United States will increase the cost of the overall project by more than 25 percent Before issuing a waiver, the Federal awarding agency must receive a written request from a non-Federal entity to waive the application of the Buy America Preference. The awarding agency must then “prepare a detailed written explanation,” make the waiver and explanation publicly available, allow a minimum 15-day public comment period, and then submit to OMB for final review. The guidance exempts awards expenditures for financial assistance made in anticipation of or response to an event or events that qualify as an ‘‘emergency’’ or ‘‘major disaster.” Public Comment Period OMB has provided only 30 days to comment on the new standard.  NAHB will submit comments as we believe that, under OMB’s proposal as written, virtually all housing development could be excluded from the standard. We have strongly urged HUD to exempt single-family and multifamily affordable housing projects from BABA mandates. However, NAHB remains concerned that the “built in America” standards may stall road and utility projects funded by CDBG or HOME that are needed to allow housing development to take place. Related ‹ Housing Affordability Hits Record Low but Turning Point Lies AheadTags: baba, bipartisan infrastructure law, brass, build america buy america, Building Materials, cement, concrete, copper, drywall, fiber optic cable, glass, inflation, infrastructure investment and jobs act, iron, lumber, materials shortage, millwork, nickel, producer prices, pvc, shortage, softwood lumber, steel, tin, windows

OMB Proposes Standards on Building Materials Made in America2023-02-10T12:23:37-06:00

Economic Growth and Signs of Cooling Inflation End 2022

2023-01-26T16:25:51-06:00

The U.S. economy continued to grow in the fourth quarter of 2022. As consumer spending and private inventory investment helped increase GDP, residential fixed investment dragged down the contribution to percent change in real GDP by 1.29 percentage points. More importantly, the data from the GDP report suggests that inflation is cooling. The GDP price index, rose 3.5% for the fourth quarter, down from a 9.0% increase in the second quarter and a 4.4% increase in the third quarter. Also, the Personal Consumption Expenditures (PCE) price Index, capturing inflation (or deflation) across a wide range of consumer expenses and reflecting changes in consumer behavior, rose 3.2% in the fourth quarter, compared with a 7.5% increase in the first quarter of 2022. Looking forward, only a mild recession is expected for this cycle due to the Federal Reserve tightening financial conditions. According to the “advance” estimate released by the Bureau of Economic Analysis (BEA), real gross domestic product (GDP) increased at an annual rate of 2.9% in the fourth quarter, following a 3.2% increase in the third quarter. In 2022, real GDP contracted in the first half and then rebounded. For the full year, real GDP increased 2.1% in 2022, down from a 5.9% increase in 2021 and slightly better than NAHB’s forecast of 1.9%. This quarter’s increase reflected increases in private inventory investment, consumer spending, government spending, and nonresidential fixed investment, partially offset by decreases in residential fixed investment and exports. The increase in private inventory investment was led by manufacturing as well as mining, utilities, and construction industries. Consumer spending rose at an annual rate of 2.1% in the fourth quarter, reflecting increases in both services and goods. While expenditures on services increased 2.6% at an annual rate, goods spending increased 1.1% at an annual rate, led by motor vehicles and parts (+7.4%). Meanwhile, federal government spending increased 6.2% in the fourth quarter, led by an increase in nondefense spending, while state and local government spending rose 2.3%, led by an increase in compensation of state and local government employees. The deceleration in real GDP in the fourth quarter mainly reflected a downturn in exports and decelerations in nonresidential fixed investment, state and local government spending and consumer spendings. Nonresidential fixed investment increased 0.7% in the fourth quarter. An increase in intellectual property products was partly offset by a decrease in equipment. Additionally, residential fixed investment (RFI) decreased 26.7% in the fourth quarter. This was the seventh consecutive quarter for which RFI subtracted from the headline growth rate for overall GDP. Within residential fixed investment, single-family structures declined 26.7% at an annual rate, multifamily structures rose 17.3% and other structures (specifically brokers’ commissions) decreased 23.1%. Related ‹ Housing Share of GDP Lower in the Fourth Quarter of 2022New Home Sales Uptick in December But Market Weakness Remains ›Tags: economics, gdp, inflation, macroeconomics, macroeconomy, residential fixed investment

Economic Growth and Signs of Cooling Inflation End 20222023-01-26T16:25:51-06:00

Good News: Inflation Continues its Cooling Trend

2023-01-12T09:38:45-06:00

Consumer prices in December saw the largest year-over-year decrease since April 2020. While still elevated, inflation experienced the third month below an 8% annual growth rate since February 2022. Moreover, this was the sixth consecutive month of a deceleration. However, the shelter index (housing inflation) continued to rise at an accelerated pace and was the largest contributor to the total increase. Shelter inflation will primarily be cooled in the future via additional housing supply. While inflation appears to have peaked and continues to slow, inflation in core service (excluding shelter) has not begun to ease. However, real-time data from private data providers indicate that rent growth is cooling, and this is not yet reflected in the CPI data. It will be reflected in the coming months. The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) fell by 0.1% in December on a seasonally adjusted basis, following an increase of 0.1% in November. The price index for a broad set of energy sources decreased by 4.5% in December as a decline in gasoline (-9.4%) offset an increase in electricity (+1.0%) and natural gas index (+3.0%). Excluding the volatile food and energy components, the “core” CPI rose by 0.3% in December, following an increase of 0.2% in November. Meanwhile, the food index increased by 0.3% in December with the food at home index rising 0.2%. Most component indexes continued to increase in December. The indexes for shelter (+0.8%), household furnishings and operations (+0.3%), recreation (+0.2%), motor vehicle insurance (+0.6%), education (+0.3%) as well as apparel (+0.5%) showed sizeable monthly increases in December. Meanwhile, the indexes for used cars and trucks (-2.5%), new vehicles (-0.1%), personal care (-0.1%) and airline fares (-3.1%) declined in December. The index for shelter, which makes up more than 40% of the “core” CPI, rose by 0.8% in December, following an increase of 0.6% in November. Both the indexes for owners’ equivalent rent (OER) and rent of primary residence (RPR) increased by 0.8% over the month. Monthly increases in OER have averaged 0.7% over the last three months. These gains have been the largest contributors to headline inflation in recent months. These higher housing costs are driven by lack of attainable supply and higher development costs. Higher interest rates will not slow these costs, which means the Fed’s tools are limited in addressing shelter inflation. During the past twelve months, on a not seasonally adjusted basis, the CPI rose by 6.5% in December, following a 7.1% increase in December. This was the slowest annual gain since October 2021. The “core” CPI increased by 5.7% over the past twelve months, following a 6.0% increase in November. The food index rose by 10.4% and the energy index climbed by 7.3% over the past twelve months. These decelerating measures indicate the Fed’s actions are having a measurable impact on inflation and reinforce the call for the Fed to slow its tightening of monetary policy. NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than overall inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster (slower) than overall inflation, the real rent index rises (declines). The real rent index is calculated by dividing the price index for rent by the core CPI (to exclude the volatile food and energy components). The Real Rent Index rose by 0.5% in December. Over the twelve months of 2022, the monthly change of the Real Rent Index increased by 0.2%, on average. Related ‹ Mortgage Activity Remains at Low LevelsTags: cpi, inflation

Good News: Inflation Continues its Cooling Trend2023-01-12T09:38:45-06:00

Property Taxes by State – 2021

2022-12-15T08:23:06-06:00

Real estate taxes vary widely across states both in terms of annual taxes paid as well as effective tax rates. In 2021, the difference between average real estate taxes (RETs) paid by New Jersey and Alabama home owners was $8,336. New Jersey continued its perennial distinction as having the highest average real estate tax bill per home owner ($9,151) as well as the highest effective tax rate (2.02%). Hawaii (0.28%) and Alabama ($815) were at the other end of the spectrum, boasting the lowest average effective tax rate and annual real estate tax bill, respectively. The difference between the highest-taxed state (New Jersey) and lowest (Alabama) grew by $362 between 2019 and 2021, more than double the growth between 2017 and 2019 ($170). The overall distribution has remained roughly unchanged since 2019, as the composition of the top ten remained the same except Washington replaced Texas as the state with the 10th-highest average real estate tax bills. The map below illustrates the concentration of high average property tax bills in the Northeast. In contrast, southern states (excluding Texas) boast some of the lowest real estate tax bills for their resident homeowners. As property values vary widely by state, controlling for this variable produces a more instructive state-by-state comparison. In keeping with prior analyses, NAHB calculates this by dividing aggregate real estate taxes paid by the aggregate value of owner-occupied housing units within a state. The effective tax rate can be expressed either as a percentage of home value or as a dollar amount levied per $1,000 of this value. The map below shows that New Jersey has the dubious distinction of imposing the highest effective property tax rate—2.02% or $20.22 per $1,000 of home value. Hawaii levies the lowest effective rate in the nation—0.28%, or $2.82 per $1,000 of value. However, this low rate combined with extremely high home values results in middle-of-the-pack per-homeowner property tax bills. Hawaii’s average owner-occupied home value ($822,187) is second only to California’s ($831,859) and is 61% higher than New York’s ($509,768). Interstate differences among home values explain some, but not all, of the variance in real estate tax bills across the country. Texas is an illustrative example of a state in which home values hardly, if at all, explain real estate tax bills faced by homeowners. While Texas ranks in the bottom half of states in terms of average home values, it is 11th in average real estate taxes paid. Other factors are clearly at play, and state and local government financing turns out to be a major one. Property taxes accounted for 36.2% of state and local tax receipts in 2021 after making up 39.9% of the total in 2020 due to a broad decline in income tax revenue as a result of the pandemic. However, some state and local governments rely more heavily on property taxes as a source of revenue than others. Texas serves as an excellent example once again. Unlike most states, Texas does not impose a state income tax on its residents.  Even though per capita government spending is tame compared with other states—14th-lowest in the country—Texas and its localities must still find a way to fund spending.  Local governments accomplish this by levying the sixth-highest average effective property tax rate (1.50%) in the country.  The state government partly makes up for foregone individual income tax revenue by imposing its corporate tax on revenue rather than income. Of course, neither home values nor a state’s reliance on property tax revenue is fully responsible for the geographic variance of property tax rates and revenues.  State spending per resident, the nature of this government spending, the prevalence of homeownership within a state, and demographics all affect tax policy and, thus, the type and magnitude of tax collections. These variables combine to explain the variance that the two factors discussed here do not fully capture. Related ‹ Downshift for the FedTags: Building Materials, cost of homeownership, effective tax rates, inflation, local government, property tax, property tax rates, property taxes, real estate taxes, residential real estate, state and local government, state and local taxes, taxes

Property Taxes by State – 20212022-12-15T08:23:06-06:00

Inflation Continues to Cool in November

2022-12-13T09:16:30-06:00

Consumer prices in November saw the smallest year-over-year gain since December 2021.While still elevated, inflation experienced the second month below an 8% annual growth rate since February 2022. However, the shelter index continued to rise at an accelerated pace and was more than offsetting decreases in energy indexes. Shelter inflation will primarily be cooled in the future via additional housing supply. As inflation appears to have peaked and continues to slow, this may ease some of pressure on the Fed to maintain a more aggressive monetary policy. The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) rose by 0.1% in November on a seasonally adjusted basis, following an increase of 0.4% in October. The price index for a broad set of energy sources fell by 1.6% in November as the gasoline index (-2.0%), the natural gas index (-3.5%) and the electricity index (-0.2%) all declined. Excluding the volatile food and energy components, the “core” CPI increased by 0.2% in November, following an increase of 0.3% in October. This is the smallest monthly increase since August 2021. Meanwhile, the food index increased by 0.5% in November with the food at home index also rising 0.5%. Most component indexes continued to increase in October. The indexes for shelter (+0.6%), communication (+1.0%), recreation (+0.5%), motor vehicle insurance (+0.9%), education (+0.3%) as well as personal care (+0.7%) showed sizeable monthly increases in November. Meanwhile, the indexes for used cars and trucks (-2.9%), medical care (-0.5%) and airline fares (-3.0%) declined in November. The index for shelter, which makes up more than 40% of the “core” CPI, rose by 0.6% in November, following an increase of 0.8% in October. The indexes for owners’ equivalent rent (OER) increased by 0.7% and rent of primary residence (RPR) increased by 0.8% over the month. Monthly increases in OER have averaged 0.7% over the last three months. More cost increases are coming from this category, which will maintain pressure on inflationary forces in the months ahead. These higher costs are driven by lack of supply and higher development costs. Higher interest rates will not slow these costs, which means the Fed’s tools are limited in addressing shelter inflation. During the past twelve months, on a not seasonally adjusted basis, the CPI rose by 7.1% in November, following an 7.7% increase in October. The “core” CPI increased by 6.0% over the past twelve months, following a 6.3% increase in October. The food index rose by 10.6% and the energy index climbed by 13.1% over the past twelve months. NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than overall inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster (slower) than overall inflation, the real rent index rises (declines). The real rent index is calculated by dividing the price index for rent by the core CPI (to exclude the volatile food and energy components). The Real Rent Index rose by 0.6% in November. Over the first eleven months of 2022, the monthly change of the Real Rent Index increased by 0.2%, on average. Related ‹ Households’ Real Estate Asset Growth Continues to Slow in Q3Tags: cpi, inflation, monetary policy, shelter

Inflation Continues to Cool in November2022-12-13T09:16:30-06:00
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