Based on current permit, price and employment data, the nationwide average is running extremely close to its pre-recession levels of housing and economic activity, according to the National Association of Home Builders (NAHB). [1]
The NAHB/First American Leading Markets Index (LMI) [2] reported that 146 out of 340 metros nationwide either returned to or exceeded their last normal levels of housing and economic activity in Q2, a year-over-year gain of 66 markets. The nationwide score of 0.97 indicates that housing and economic activity nationwide is at 97 percent of its last normal level. Over-the-year, 91 percent of markets improved as far as housing and economic activity.
“This gradual uptick is in line with NAHB’s forecast for a slow but steady recovery of the housing market,” said NAHB Chairman Ed Brady. “With a strengthening economy, solid job growth and low mortgage interest rates, the market should continue on an upward trajectory throughout the rest of the year.”
The metro with the highest score for Q2’s LMI was Baton Rouge, Louisiana, with 1.61
“Among the LMI components, house prices are making the most far-reaching progress, with almost 97 percent of markets having returned to or exceeded their last normal levels. Meanwhile, 78 metros have reached or exceeded normal employment activity,” said NAHB Chief Economist Robert Dietz. “Single-family permits have edged up to 50% of normal activity, but remain the sluggish element of the index.”
“With a strengthening economy, solid job growth and low mortgage interest rates, the market should continue on an upward trajectory throughout the rest of the year.”
Ed Brady, NAHB Chairman
Baton Rouge, Louisiana, continues to top the list of major metros on the LMI, with a score of 1.61, meaning that housing and economic activity in Baton Rouge in Q2 was running at 61 percent better than its last normal level. Other markets in the top 10 were Austin, Texas; Honolulu; San Jose; Houston; Provo, Utah; Spokane, Washington; Nashville; Los Angeles; and Oklahoma City.
Midland and Odessa, Texas, topped the list of smaller metros, each with LMI scores of 2.0 or higher, meaning that housing and economic activity is more than double their pre-recession normal activity. Other small metros high on the list were Manhattan, Kansas; Walla Walla, Washington; and Grand Forks, North Dakota.
“More than 85 percent of all metros saw their Leading Markets Index rise over the quarter, a signal that the overall housing market continues to move forward,” said Kurt Pfotenhauer, vice chairman of First American Title Insurance Company, which co-sponsors the LMI report.
The LMI score is achieved by taking the average permit, price, and employment levels in the last 12 months and dividing each by the annual average over the last period of annual growth—which is 200o to 2003 for single-family permits and home prices and 2007 for employment. The score for each market is calculated by averaging the three components, and the national measures of the three metrics are averaged to attain the national score.