Small Markets Leading Way for 2014 Housing Recovery

Smaller metropolitan areas appear to bernleading the country in a return to normal levels of economic and housingrnactivity the National Association of Home Builders (NAHB) said today.  The associations Leading Markets Index,rnproduct in conjunction with First American Title Insurance, shows 54 metropolitanrnareas are currently operating above the LMI’s baseline level and NBHA says “mostrnof them” are what are considered small markets. rnThe index’s nationwide score of .86 indicates that, based on currentrnpermits, prices and employment data, the nationwide market is running at 86rnpercent of normal economic and housing activity.</p

NAHB tracks 350 metro areas for itsrnindex which replaces the older Improving Markets list.  The index uses the same data bases asrnImproving Markets; employment information from the Bureau of Labor Statistics,rnhome prices provided by Freddie Mac, but shifts the focus from identifyingrnmarkets that have recently begun to recover to identifying areas that arernapproaching and exceeding previous normal levels of economic and housingrnactivity.  </p

Each market is scored by taking its averagernpermit, price, and employment levels for the past 12 months and dividing eachrnby its annual average over the last period of normal growth. For single-familyrnpermits and home prices, 2000-2003 is used as the last normal period, and forrnemployment, 2007 is the base comparison. The three components are then averagedrnto provide an overall score for each market; a national score is calculatedrnbased on national measures of the three metrics. An index value above onernindicates that a market has advanced beyond its previous normal level ofrneconomic activity.</p

Because the October government shutdownrnlimited access to much of the needed data NAHB combined the November andrnDecember LMI reports.  The figures forrnNovember showed that 55 housing markets were operating at or above their lastrnnormal levels and the nationwide market was operating at 85 percent of normalrngrowth.<br /<br /"This index shows that most housing markets across the nation arerncontinuing a slow, gradual climb back to normal levels,” said NAHBrnChairman Rick Judson.  “Policymakersrnmust guard against actions that could impede or even reverse the modest gainsrnof the past year.”<br /<br /Noting that smaller metros accounted for most of the 54 markets on the currentrnLMI that are at or above normal levels, NAHB Chief Economist David Crowe saidrnthat "smaller markets are leading the way, particularly where energy isrnthe primary economic driver. Nearly half of the markets in the top 54 are inrnthe energy states of Texas, Louisiana, North Dakota, Wyoming and Montana."<br /<br /"The fact that more than 125 markets on this month's LMI are showingrnactivity levels of at least 90 percent of previous norms bodes well for arncontinuing housing recovery in 2014,” said Kurt Pfotenhauer, vice chairmanrnof First American Title. <br /<br /Baton Rouge, La., tops the list of major metros on the LMI, with a score ofrn1.42 – or 42 percent better than its last normal market level. Other majorrnmetros at the top of the list include Honolulu, Oklahoma City, Austin andrnHouston, Texas, as well as Pittsburgh – all of whose LMI scores indicate thatrntheir market activity now exceeds previous norms.<br /<br /Looking at smaller metros, both Odessa and Midland, Texas, boast LMI scores ofrn2.0 or better, meaning that their markets are now at double their strengthrnprior to the recession. Also at the top of the list of smaller metros arernCasper, Wyo.; Bismarck, N.D.; and Grand Forks, N.D., respectively.

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