NAHB Counting on Employment Strength to Eventually Help Housing

The National Association of Home Builders (NAHB) said todayrnthat nationwide metropolitan area markets are improving at a constant pace and arernnearing normal economic and housing activity. rnThe Association’s Leading Market Index (LMI) issued in conjunction withrnFirst American Title Company rose slightly to .90 in the fourth quarter ofrn2014.  </p

The index is based on current data on building permits, homernprices, and employment in each of 350 metropolitan areas nationwide.  The national figure indicates that 4^{th</supquarter activity was at 90 percent of normal levels.</p}

Sixty-three of the markets returned to or exceeded theirrnlast normal levels of activity during the quarter, 11 more than in the fourthrnquarter of 2013.  Sixty-nine percent ofrnthe markets have shown improvement year-over-year.</p

“The encouraging news is employment, where the number of metros that reachedrnor surpassed their norms rose by 23 in a year,” said NAHB Chief Economist DavidrnCrowe. “However, single-family permits are only at 44 percent of normalrnactivity, and remain the sluggish component of the index.”</p

The LMI scores the metropolitan areas by taking their average permit, pricernand employment levels for the past 12 months and dividing each by their annualrnaverage over the last period of normal growth. The index uses employment datarnfrom the Bureau of Labor Statistics, house price appreciation data from FreddiernMac and single-family housing permits from the U.S. Census Bureau.  </p

For single-family permits and home prices, 2000-2003 is used as the lastrnnormal period, 2007is the base comparison for employment.  The three components are then averaged tornprovide an overall score for each market; a national score is calculated basedrnon national measures of the three metrics. An index value above one indicatesrnthat a market has advanced beyond its previous normal level of economicrnactivity.</p

Baton Rouge continues to top the list of major metros with a score of 1.41 orrn41 percent better than its last normal market level. Other major metros leadingrnthe list include Austin, Honolulu, Houston; and Oklahoma City. </p

Among smaller metros, both Midland and Odessa, Texas, have LMI scores of 2.0rnor better, meaning their markets are now at double their strength prior to thernrecession. Also leading the list of smaller metros are Grand Forks and Bismarck,rnNorth Dakota; and Casper, Wyoming. </p

Kurt Pfotenhauer, vice chairman of First American Title said, “More than 80rnpercent of all metros saw their Leading Markets Index increase or hold steadyrnover the quarter, a strong indicator that the overall housing market is makingrnheadway.” </p

NAHB Chairman Tom Wood said that, “A growing economy andrnrising consumer confidence should help drive the release of pent-up demand inrn2015.”

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