NAHB recently unveiled an index that tracks housing markets on the mend, the NAHB/First American Improving Markets Index (IMI). The IMI is intended to draw attention to the fact that housing markets are local and that there are metropolitan areas where economic recovery is underway. The index measures three readily available monthly data series that are independently collected and are indicative of improving economic health. The three are employment, house prices and single family housing permit growth.
For the sixth release 98 markets are currently classified as improving under a conservative examination of local economic and housing market conditions. Among these areas is the Cincinnati, Ohio-Kentucky-Indiana metropolitan statistical area (MSA).
The health of the Cincinnati housing market is due to its well diversified economic base. Cincinnati possesses a large regional healthcare center, conducts an increasing amount of high-tech manufacturing, benefits from the presence of the University of Cincinnati and a large regional IRS office, and is headquarters to 10 Fortune 500 companies. According to home builder Bob Schroder, Vice President of Arlinghaus Builders, LLC, “the combination of families relocating here for jobs, pent-up demand from buyers who were on the fence just a few months ago who are suddenly now buying because of a general sense of optimism and a rise in exports, are what is leading the increased traffic we are seeing.” He went on to say that “lots of small hi-tech employers in robotics and manufacturing are hiring and as a result workers are upgrading their skills and that too has caused an up-tick in employment.”
Comparing educational data from the 2000 Census to the 2009 American Community Survey shows that Cincinnati has experienced increasing education levels. The number of people with a high school diploma or less fell from 226,016 to 178,862, a decline of more than 47,000. By contrast, the number of individuals with a high school diploma increased by 11% from 410,581 to 455,199 and the number of people with some college jumped by 16% from 253,198 to 294,936. Similarly, those individuals with an associate degree jumped by 28% from 78,221 to 99,835 and the number of individuals with a B.A rose by 25% from 207,222 to 259,686. Finally, the number with professional degrees skyrocketed by 35%, from 112,247 to 151,167. Note that the percentage increase in those with a particular degree increases the higher the degree obtained.
According to Fred Cernetisch, General Manager of Pella Windows and Doors, “house prices are on the upswing because businesses have right-sized themselves. As a result they are financially more secure, are making profits again and many are planning to add staff to take advantage of business opportunities that present themselves. In addition there is an increasingly pervasive sense of cautious optimism.“ As a result, house prices have held up well over the past few years. Prices are up 2.8% since the trough in February 2011 and are just 8.2% off where they were in December 2007.
Improving economic conditions have resulted in payroll employment being down less than 6.0% from its where it was in December 2007 and up by 2.0% since the trough in December 2010. Single family permitting activity is up 0.4% on a seasonally adjusted monthly average basis from the trough set in January 2009. While new homes are being built in many parts of the Cincinnati MSA, activity has been primarily centered in the city of Cincinnati itself and in Boone, Campbell and Kenton counties to the south and Butler, Clermont and Warren counties to the north.