Housing and economic activity has returned to or exceeded normal levels in 68 of about 360 metropolitan areas in the country (about 19 percent) as of the end of Q1 2015, according to the National Association of Home Builders (NAHB)/First American Leading Markets Index (LMI) released Wednesday.
The 68 markets represent a year-over-year increase of seven markets, according to NAHB.
"The increase is heavily driven by the increase in metro areas employment index," NAHB Chief Economist David Crowe said. "The number of markets back to or above normal in employment levels increased from 30 to 56 over the year. The number of markets returning to house price levels last seen in the early aughts has remained high at 95 percent of all metros measured. The slowest indicator to return to normal has been single-family permits as only 7 percent of the listed metros are issuing as many or more permits compared to the early aughts."
The score for the nationwide index increased to 0.91, meaning that housing and economic activity is running at 91 percent on the average nationwide based on the most current data for the three leading indicators: single-family housing permits, home prices, and employment. A score of one on for one of the indicators indicates a return to "normal" levels, or returned to the level for that indicator's last period of normality. The score of the three indicators is averaged for a composite score for each metro area and nationwide.
The markets with the strongest recovery are those with the strongest employment growth and vice versa, according to the LMI. Among major metros, the area with the highest rating on the LMI was Baton Rouge, Louisiana, at 1.43, meaning that area has exceeded its last normal level by 43 percent. Other major metros near the top of the list for highest value on the LMI were Austin, Texas; Honolulu; Houston; Oklahoma City; San Jose and Los Angeles, California; Salt Lake City; Charleston, South Carolina; and Nashville, Tennessee.
About 68 percent of the nation's approximately 360 markets improved year-over-year in Q1. The number of markets for the Q1 LMI with a value exceeding 90 percent was 157 (nearly 44 percent of markets), according to Kurt Pfotenhauer, vice chairman of the First American Title Company.
"The markets are continuing to make gains," said NAHB Chairman Tom Woods, a homebuilder from Blue Springs, Missouri. "A strengthening economy and low interest rates should spur the release of pent-up demand and keep housing moving forward this year."
Among the smaller metros, Midland and Odessa, Texas, posted LMI scores of 2 or higher, meaning those markets are twice as strong as they were at their normal pre-recession levels. Other smaller metros with high LMI values for Q1 were Manhattan, Kansas; Grand Forks, North Dakota; and Casper, Wyoming.
"Strong employment growth leads to the need for more homes and the markets showing the greatest improvement are in strong employment markets, primarily in energy production and refining," Crowe said. "Half of the 68 metros with an index value of one or above are in the oil/energy belt in the middle of the country."