Leading Markets Index Shows 59 Metros at or Above Normal Levels in March
March 6, 2014 - Markets in 59 out of the approximately 350 metro areas nationwide returned to or exceeded their last normal levels of economic and housing activity, according to the National Association of Home Builders/First American Leading Markets Index (LMI), released today. This represents a net gain of one from the previous month.
The index’s nationwide score held steady at .87. This means that based on current permits, prices and employment data, the nationwide average is running at 87 percent of normal economic and housing activity. Meanwhile, 32 percent of metro areas saw their score rise this month and 84 percent have shown an improvement over the past year.
“Despite the cold weather that has constrained economic and housing activity across much of the nation this winter, markets are returning to normal levels,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Del. “As the job and housing markets continue to mend and the onset of spring releases the pent-up demand for new homes, this will bode well for the remainder of 2014.”
“The strong energy sector is at the forefront of the recovery and centered in many small and mid-sized markets in Texas, Louisiana, North Dakota and Wyoming,” said NAHB Chief Economist David Crowe. “In fact, these four states account for eight of the top 10 markets on the LMI and 45 percent of the markets that are at or above normal.”
“The number of markets on this month’s LMI at or above 90 percent of previous norms has climbed to 130 – a positive trend to watch as the year progresses,” said Kurt Pfotenhauer, vice chairman of First American Title Insurance Co., which co-sponsors the LMI report.
Baton Rouge, La., tops the list of major metros on the LMI, with a score of 1.41 – or 41 percent better than its last normal market level. Other major metros at the top of the list include Honolulu, Oklahoma City, Austin and Houston, Texas, as well as Harrisburg, Pa. and Pittsburgh – all of whose LMI scores indicate that their market activity now exceeds previous norms.
Looking at smaller metros, both Odessa and Midland, Texas, boast LMI scores of 2.0 or better, meaning that their markets are now at double their strength prior to the recession. Also at the top of the list of smaller metros are Casper, Wyo.; Bismarck, N.D.; and Grand Forks, N.D., respectively.
The LMI shifts the focus from identifying markets that have recently begun to recover, which was the aim of a previous gauge known as the Improving Markets Index, to identifying those areas that are now approaching and exceeding their previous normal levels of economic and housing activity. More than 350 metro areas are scored by taking their average permit, price and employment levels for the past 12 months and dividing each by their annual average over the last period of normal growth. For single-family permits and home prices, 2000-2003 is used as the last normal period, and for employment, 2007 is the base comparison. The three components are then averaged to provide an overall score for each market; a national score is calculated based on national measures of the three metrics. An index value above one indicates that a market has advanced beyond its previous normal level of economic activity.
Editor’s Note: In calculating the LMI, NAHB utilizes employment data from the Bureau of Labor Statistics, house price appreciation data from Freddie Mac and single-family housing permits from the U.S. Census Bureau. The LMI is published on the fourth working day of each month, unless that day falls on a Friday -- in which case, it is released on the following Monday. The most recent employment data was not available for the March index so for this month only, the employment data from February was reused along with updated permit and housing price data.
For historical information and charts, please go to nahb.org/lmi.