In the third quarter of this year, 162 of approximately 340 metro areas saw housing markets reach pre-recession levels as their component scores in the Leading Markets Index (LMI) reached or surpassed a baseline reading of 1 from July to September, according to the National Association of Home Builders/First American quarterly LMI release Monday morning. This represents a year-over-year net gain of 73 markets.
The index’s nationwide score posted an improvement from last quarter’s 0.97 to 0.98, meaning that the nationwide average now stands at about 98% of its normal status. In the meantime, 91% of markets have shown progress in both the local economy and housing activity compared to a year earlier.
“Ongoing job growth, low mortgage rates and rising incomes are contributing to a firming housing market and economy,” NAHB Chairman Ed Brady said in a statement. “Though some areas are recovering faster than others, the overall trend is positive.”
Top 10 Large MSAs 3Q2016
No.1 Baton Rouge, La. LMI: 1.68
No.2 Austin-Round rock, Texas LMI: 1.37
No.3 Urban Honolulu, Hawaii LMI: 1.29
No.4 San Jose-Sunnyvale-Santa Clara, Calif. LMI: 1.22
No.5 Provo-Orem, Utah LMI: 1.20
No.6 Spokane-Spokane Valley, Wash. LMI: 1.20
No.7 Nashville-Davidson-Murfreesboro–Franklin, Tenn. LMI: 1.18
No.8 Houston-The Woodlands-Sugar Land, Texas LMI: 1.17
No.9 Charleston-North Charleston, S.C. LMI: 1.17
No.10 Los Angeles-Long Beach-Anaheim, Calif. LMI: 1.16
The index—a composite score based on three factors: single-family building permits, home prices, and employment—compares the current housing market conditions to the pre-recession normal level. The last normal period for single-family permits and house prices was between the years 2000 and 2003; for employment the normal reading is baded on 2007.
Top 10 Small MSAs 3Q2016
No.1 Odessa, Texas LMI: 2.08
No.2 Midland, Texas LMI: 1.99
No.3 Ithaca, N.Y. LMI: 1.82
No.4 Walla Walla, Wash. LMI: 1.76
No.5 Manhattan, Kan. LMI: 1.72
No.6 Florence-Muscle Shoals, Ala. LMI: 1.67
No.7 Grand Forks, N.D.-Minn. LMI: 1.64
No.8 Grand Island, Neb. LMI: 1.55
No.9 Gadsden, Ala. LMI: 1.47
No.10 Bismarck, N.D. LMI: 1.47
Among the three components, prices have recovered the fastest, with a current score of 1.45, which is 45% higher than the pre-recession level. Employment, now growing at a slower pace as the economy approaches nominal full employment, is approximately 98% of its normal level. Building permits lagged compared to other two categories, due in part to tight lot inventory and rising building cost. In this quarter, only 51% of the country saw permits back to the pre-recession level.
But in general, the housing market is on the solid side.
“Nearly 80% of metro areas posted an increase in their LMI score over the past quarter, while more than nine out of 10 recorded an annual increase,” said Kurt Pfotenhauer, vice chairman of First American Title Insurance Company, which co-sponsors the LMI report. “These are strong indicators that the housing recovery remains steadily on an upward trajectory.”
Read the full release on National Association of Home Builders here >>
