Housing Recovery Continues at Gradual Pace
WASHINGTON — Markets in 68 of the approximately 360 metro areas nationwide returned to or exceeded their last normal levels of economic and housing activity in the first quarter of 2015, according to the National Association of Home Builders/First American Leading Markets Index (LMI), released today. This represents a year-over-year net gain of seven markets.
The index’s nationwide score edged up to .91, meaning that based on current permit, price and employment data, the nationwide average is running at 91 percent of normal economic and housing activity. Meanwhile, 68 percent of markets have shown an improvement year-over-year.
“The markets are continuing to make gains,” said NAHB Chairman Tom Woods, a home builder from Blue Springs, Mo. “A strengthening economy and low interest rates should spur the release of pent-up demand and keep housing moving forward this year.”
Baton Rouge, La., continues to top the list of major metros on the LMI, with a score of 1.43 – or 43 percent better than its last normal market level. Other major metros leading the pack include Austin, Texas; Honolulu; Houston; and Oklahoma City. Rounding out the top 10 are San Jose, Calif.; Los Angeles; Salt Lake City; Charleston, S.C.; and Nashville, Tenn.
“The strongest gain is employment, where the number of metros that reached or surpassed their norms nearly doubled in a year,” said NAHB Chief Economist David Crowe. “Despite a minor uptick in single-family permits, only 7 percent of the markets are at or above their normal permit activity.”
“The number of markets on this quarter’s Leading Markets Index at or above 90 percent of previous normal levels has reached 157 – a sign that the recovery is spreading to a wide range of markets,” said Kurt Pfotenhauer, vice chairman of First American Title Insurance Company, which co-sponsors the LMI report.
Looking at smaller metros, both Midland and Odessa, Texas, have LMI scores of 2.0 or better, meaning their markets are now at double their strength prior to the recession. Also leading the list of smaller metros are Manhattan, Kan.; Grand Forks, N.D; and Casper, Wyo., respectively.
The LMI shifts the focus from identifying markets that have recently begun to recover, which was the aim of a previous gauge known as the Improving Markets Index, to identifying those areas that are now approaching and exceeding their previous normal levels of economic and housing activity. More than 350 metro areas are scored by taking their average permit, price and employment levels for the past 12 months and dividing each by their annual average over the last period of normal growth. For single-family permits and home prices, 2000-2003 is used as the last normal period, and for employment, 2007 is the base comparison. The three components are then averaged to provide an overall score for each market; a national score is calculated based on national measures of the three metrics. An index value above one indicates that a market has advanced beyond its previous normal level of economic activity.
In calculating the LMI, NAHB utilizes employment data from the Bureau of Labor Statistics, house price appreciation data from Freddie Mac and single-family housing permits from the U.S. Census Bureau. The LMI is published quarterly on the fourth working day of the month, unless that day falls on a Friday — in which case, it is released on the following Monday. For historical information and charts, please go to nahb.org/lmi.