Housing Recovery Continues at Modest Pace

Filed in Construction Industry, Economics by on February 25, 2016 1 Comment

housechartOut of approximately 340 metro area markets nationwide, 117 of them returned to or exceeded their last normal levels of economic and housing activity in the fourth quarter of 2015, according to the NAHB/First American Leading Markets Index (LMI) released today. This represents a year-over-year net gain of 52 markets.

The index’s nationwide score inched up to .94, meaning that based on current permit, price and employment data, the nationwide average is running at 94% of normal economic and housing activity. Meanwhile, 90% of markets have shown an improvement year over year.

“Housing markets are strengthening gradually as the economy firms and job creation continues,” said NAHB Chairman Ed Brady. “While some areas are recovering at a faster rate than others, the large majority of metros are moving in the right direction.”

“Among the LMI components, house prices continue to show the most extensive recovery, with 322 markets having returned to or exceeded their last normal levels. Meanwhile, 76 metros have reached or exceeded normal employment activity,” said NAHB Chief Economist David Crowe. “Single-family permits are edging forward, but remain at only 48% of normal activity.”

Baton Rouge, La., continues to top the list of major metros on the LMI, with a score of 1.52 – or 52% better than its last normal market level. Other leading major metros include Austin, Texas; Honolulu; Houston; and San Jose, Calif. Rounding out the top 10 are Oklahoma City; Los Angeles; Nashville, Tenn.; Salt Lake City and Charleston, S.C.

Looking at smaller metros, both Midland and Odessa, Texas, have LMI scores of 2.0 or better, meaning that their markets are now at double their strength prior to the recession. Also at the top of smaller metros are Wheeling, W.Va.; Manhattan, Kan.; and Walla Walla, Wash.

The LMI identifies those areas that are now approaching or exceeding their previous normal levels of economic and housing activity. 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. For employment, 2007 is the base year of 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.

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