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Housing Market Slips Slightly

The national housing market moved slightly farther away from stability in May as applications for home purchase mortgages remained subdued.

Freddie Mac's Multi-Indicator Market Index (MiMi) for the month slipped to a value of -2.64 in May, indicating a slightly weaker market than in April, when the index measured -2.59.

The index tracks national and state-level market data to gauge how the single-family housing market is faring against its long-term stable range based on home purchase applications, payment-to-income ratios, proportion of on-time mortgage payments, and local employment. An index value between -2 and 2 is considered to be in the ideal range between a weak market and one that is overheating beyond sustainable levels.

While the index has been relatively flat over the last few months, Freddie Mac notes yearly comparisons look more promising, with an increase of 0.86 points and improvement in most of the different indicators.

"When we look at the other MiMi indicators outside of mortgage purchase applications, the news remains positive—unemployment rates are coming down, more borrowers are paying their mortgages on time, and mortgage rates remain low," said Frank Nothaft, chief economist at Freddie Mac. "So we remain cautiously optimistic the housing recovery will continue, albeit slowly, until we see more tightening in the labor markets to give personal incomes a much needed jolt."

Also encouraging is the fact that more markets at the metro level are returning to their stable range of activity even as the country as a whole struggles to get out of "stall speed."

The standout market in May, said deputy chief economist Len Kiefer, was Salt Lake City, which saw three of its four MiMi indicators climb into a stable range.

"In fact, on a yearly basis, the metro area find sits purchase applications are up," Kiefer said. "The positive trend in home purchase applications reflects a strong local labor market, with employment growth in the Salt Lake City metro area about double the national average."

Also joining the list of stable areas in May were Los Angeles, Nashville, and Pittsburgh, bringing eight of the 50 surveyed metro markets up into their stable range.

At the state level, 13 of the 50 states and the District of Columbia are now in their stable range, with Idaho and Utah joining the list.

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