There’s no question that our industry continues to suffer from the effects of one of the worst housing market downturns in living memory.
After peaking at 2.1 million starts in 2005, the highest level since the early 1970s, total housing production plunged to a record low of 554,000 units in 2009. There was a slight resurgence last year when starts rose to 585,000. Total housing starts for 2011 are projected to increase slightly to about 592,000, still only a fraction of normal production levels.
In any event, it would be a mistake to assume that those national housing starts numbers provide a comprehensive picture of conditions in the housing market throughout the nation. As we know, all housing markets are local; there’s a great deal that broad aggregate statistics don’t tell.
I’m sure you’re familiar with the NAHB/Wells Fargo Housing Market Index (HMI), which provides a builders’-eye-view of the housing market, including current conditions and expectations for the future.
It was introduced in 1985 and rapidly became a leading indicator for the housing market. The HMI is widely viewed as a key housing benchmark and is closely watched by economists, market analysts, and our industry.
In September, the NAHB introduced a new index to shed light on a part of the market that has received little attention to date—metropolitan areas that have stabilized and are showing consistent signs of recovery.
The NAHB/First American Improving Markets Index (IMI) identifies housing markets through-out the country that have shown signs of improving economic health for at least six consecutive months.
To identify the top improving metropolitan statistical areas, the index measures three sets of independent monthly data: employment growth from the Bureau of Labor Statistics, house price appreciation from Freddie Mac, and single-family housing permit growth reported by the U.S. Census Bureau.
The first IMI list in September included 12 metropolitan areas in Louisiana, Alaska, Maine, North Dakota, Wyoming, North Carolina, Pennsylvania, and Texas.
Many of these markets are in energy-rich areas with relatively strong employment that supports housing demand. The number of markets on the list increased to 23 in October and expanded to 30 in November. We expect to see that roster continue to grow in the months ahead.
Perhaps most telling is that not a single market anywhere in the nation would have met the criteria to be included on the improving markets index a year before the IMI was launched.
That’s certainly cause for a bit of optimism. We can say definitively that despite the ongoing challenging conditions in the housing sector, some markets are seeing consistent, ongoing improvement.
The bottom line: Improving markets throughout the country are leading the way toward a faint glimmer of light at the end of a very long tunnel.
Learn more about markets featured in this article: Fargo, ND.
