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Housing Growth Remains Sluggish in Most Markets

slow-growthOn Wednesday, Freddie Mac released its monthly Multi-Indicator Market Index (MiMi) showing mixed signals for the U.S. housing market, with most markets struggling to improve at a pace faster than a slow crawl.

Despite declining mortgage delinquencies, improving local employment, house price gains, and attractive mortgage rates, most housing markets remain weak due to weak home purchase mortgage applications.

MiMi assesses the health of each single-family housing market relative to its own long-term stable range by looking at home purchase applications, payment-to-income ratios, proportion of on-time mortgage payments in each market, and the local employment picture. The indicators combine to create a composite MiMi value for each market. Anything below -2.0 is considered "weak" and anything above 2.0 is considered to be growing too quickly to be sustainable.

Currently, the national MiMi value stands at -3.01 points, indicating a weak housing market overall, with only a slight improvement from March to April and a three-month trend improvement of 0.07 points.

The outlook looks better compared to last year. On a year-over-year basis, the U.S. housing market has improved by 0.65 points, signaling that the market trajectory is moving in a positive direction. The nation's all-time MiMi low of -4.49 occurred in November 2010 when the housing market was at its weakest.

"With the latest release of MiMi we're seeing very slow improvement on the housing front with most markets still trying to move beyond stall speed. The MiMi indicators that are improving across the board show the local jobs picture getting better and seriously delinquent rates continuing to come down," said Frank Nothaft, Freddie Mac's chief economist. "Both indicators are critical to decreasing distress in local markets, but that's also putting more pressure on markets with thinning inventory, especially where short sales have fallen off dramatically."

There are some bright spots to point to: Nationwide, 10 of the 50 states plus the District of Columbia are in their stable range, with North Dakota, Wyoming, the District of Columbia, Louisiana, and Alaska ranking in the top five.

Four of the top 50 metro areas are in their stable range: San Antonio, Houston, Austin, and New Orleans.  Metro areas in the Lone Star State now hold the top three spots in the nation.

"Texas is clearly a standout with three of its metros claiming the top five MiMi spots. However, states like South Carolina, Rhode Island and Ohio have showed marked improvement since just the beginning of the year," said Deputy Chief Economist Len Kiefer. "In fact, those metro areas that are closest to joining the handful of markets that have already achieved their stable range of housing activity are Pittsburgh and Oklahoma City, as is the state of Oklahoma. And solid jobs gains, attractive mortgage rates and good affordability will help this trend spread to even more markets. However, income growth and greater inventory is just as important if we're going to sustain any type of meaningful housing recovery."

About Author: Derek Templeton

Derek Templeton is an attorney based in Dallas, Texas. He practices in the areas of real estate, financial services, and general corporate transactional law. His experience includes time as an Attorney Adviser for the U.S. Small Business Administration and as General Counsel for a nonprofit organization in Dallas. A self-avowed "policy junkie," he has a keen interest in the effect that evolving federal policy has on the mortgage, default servicing, and greater housing industries.
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