Small Metros Leading Housing Recovery
Washington, DC, Oct. 8, 2013 -- Housing markets in 52 out of the approximately 350 metro areas nationwide have now returned to or exceeded their pre-recessionary levels of activity, according to the National Association of Home Builders/First American Leading Markets Index.
The new index, which replaces the former Improving Markets Index, recorded an initial nationwide score of .85. That number indicates that, based on current permits, prices and employment data, the nationwide housing market is running at 85% of normal activity.
Baton Rouge tops the list of major metros on the LMI, with a score of 1.41 – or 41% better than its last normal market level. Other major metros at the top of the list include Honolulu, Oklahoma City, Austin and Houston, Texas, as well as Harrisburg, Pa. – all of whose LMI scores indicate that their housing markets now exceed previous norms.
Looking at smaller metros, both Odessa and Midland, Texas, boast LMI scores of 2.0 or better, meaning that their housing markets are now at double their strength prior to the recession. Also at the top of the list of smaller metros are Casper, Wyo.; Bismarck, N.D.; and Florence, Ala., respectively.
“This index helps illustrate how far the U.S. housing recovery has come, and also how much further it has to go as we continue to face some significant headwinds in terms of credit availability, rising costs for lots and labor, and uncertainties regarding Washington policymaking,” said NAHB Chairman Rick Judson.
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 activity.
More than 350 metro areas are scored by taking their average permit, price and employment numbers 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.
“Smaller metros are leading the way to a housing recovery, accounting for 43 of the top 50 markets on the current LMI,” observed NAHB Chief Economist David Crowe.
“This is very much in keeping with the results of our previous index for improving markets, and is an indication of the extent to which local economic conditions dictate the strength of individual housing markets.”