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Housing Market Stalling; Remains Short of ‘Stable’

slow-growthA national measure released Thursday shows the housing market just barely improved from February to March, further smoothing an already flat three-month trend.

Freddie Mac's Multi-Indicator Market Index (MiMi), a gauge of housing stability, slid up just 0.03 points in its latest reading to -3.06, indicating the market is still on the weak side of the spectrum. A reading between -2 and 2 on Freddie Mac's scale would be indicative of a market operating on sound fundamentals in terms of home purchase applications, payment-to-income ratios, proportion of on-time mortgage payments, and employment.

Compared to last year, the MiMi has improved by 0.66 points. However, trends are less favorable now than they were at that time, said Frank Nothaft, chief economist at Freddie Mac.

"Less than half of the housing markets MiMi covers are showing an improving trend, whereas at this same time last year more than 90 percent of these same markets were headed in the right direction," Nothaft said.

He continued, "We're hopeful that many of these markets that have stalled will start moving again now that mortgage rates have eased over the past month and the spring home buying season is upon us."

Ten of the 50 states and the District of Columbia are operating in their stable range, according to Freddie Mac, with North Dakota, Wyoming, D.C., Alaska, and Louisiana ranking in the top five. Out of the 50 markets surveyed, only four are considered stable: San Antonio, New Orleans, Austin, and Houston.

Of those metros that continue to improve to a more stable range of housing activity, Freddie Mac says "most are benefiting from the energy boom taking place along the country's mid-section."

Many other parts of the country, however, are struggling as home prices continue to rise in a trend that has become too much of a good thing.

"House price gains are a double-edged sword at this stage of the recovery," Nothaft explained. "They help those hard-hit markets where prices are still low and many homeowners are underwater, but in areas where supply is constrained, they're creating an imbalance and pricing out many first-time homebuyers."

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