The National Association of Home Builders released the National Association of Home Builders/First American Leading Markets Index (LMI) April 7. The monthly index, which uses data to assess the overall economic and housing market health of a given area, shows which markets are recovering from the recession and which are still falling behind.
The index scores over 350 metro areas across the U.S. 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, and for employment, 2007 is the base comparison. The three components are then averaged to provide an overall score for each market, and a national score is calculated based on national measures of the three metrics.
Of all the metro markets measured, 59 returned to or exceeded their last normal levels of economic and housing activity. This represents a net gain of 11 metros year over year.
The index’s nationwide score ticked up to .88 from a March reading of .87 (an index value above one indicates that a market has advanced beyond its previous normal level of economic activity). This means that based on current permit, price and employment data, the nationwide average is running at 88 percent of normal economic and housing activity. Meanwhile, 28 percent of metro areas saw their score rise this month and 83 percent have shown an improvement over the past year.
“I think the big news here is that regions outside of the energy states continue to gain ground,” said NAHB Chief Economist David Crowe. “It’s a promising sign to see areas like Los Angeles and San Jose, Calif., joining the top ten largest [metros] showing a recovery. We still expect 2014 to be a strong year for housing and to aid in the overall economic recovery. The job market continues to mend, and with that, we will see a steady release of pent-up demand of buyers.”
Baton Rouge, La., continues to top the list of major metros on the LMI with a score of 1.42 — or 42 percent 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 San Jose and Harrisburg, Pa., — all of whose LMI scores indicate that their market activity now exceeds previous norms.
“Things are getting slowly better overall,” said NAHB Chairman Kevin Kelly. “And with the housing market now entering the spring buying season, the fact that the nation’s economy is headed in the right direction is a very promising sign.”
“Stronger employment numbers seemed to be the driving force this month — an important factor to the recovery of our economy,” said Kurt Pfotenhauer, vice chairman of First American Title Insurance Co.
Smaller metros showing recovery continue to be dominated by the middle of the country experiencing an energy boom. Odessa and Midland, Texas, boast LMI scores of 2.0 or better, with their markets now at double their strength prior to the recession. Also at the top of the list of smaller metros are Bismarck, N.D.; Casper, Wyo.; and Grand Forks, N.D., respectively.