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 seventh release 101 markets are currently classified as improving under a conservative examination of local economic and housing market conditions. Among these areas is the Rochester, NY metropolitan statistical area (MSA).
The health of the Rochester housing market is due to its highly skilled workforce and diversified economy. Rochester is not only a large regional healthcare center but also benefits substantially from the presence of the University of Rochester and the Rochester Institute of technology. Moreover, because of the substantial amount of local imaging and optical research, many start-up firms in those areas deliberately choose to locate here. Finally, Rochester is the headquarters of expanding regional and national firms like Wegman’s Food Markets and Paychex.
According to home builder David Riedman, President of Riedman Development Corporation, “new high-tech firms are what makes Rochester special. High paying jobs in lasers, lenses, wireless communications, nanoparticles and more is what has allowed us to do surprisingly well.” He went on to say that “executives and senior managers are moving their families here and more often than not these households not only want nice housing but because of the dearth of inventory that means new housing.”
Comparing 2010 American Community Survey data for Rochester to the US offers strong evidence that Rochester is doing well and some insight into why. The unemployment rate is about 2.5 percentage point lower in Rochester than in the rest of the country, and the percentage of persons employed in manufacturing and in educational and healthcare services are 35 percent and 33 percent higher respectively than the national average. Because the local economy is doing well, the number of vacant housing units, be they owner-occupied units or rental units, is 30 percent lower than what it is for the nation as a whole and the percentage of owner-occupied units stands at 68.5% versus 65.4% for the entire country. Lastly, the percentage of persons with a bachelor’s degree or higher is about 20 percent higher in Rochester than it is for the rest of the US. Part of the reason for this is that the percentage of the population with a graduate or professional degree is almost 40% higher in Rochester than it is nationally.
According to Scott Fields, President of Matthews and Fields Lumber Company, “our house prices never rose like they did in many places and thus have not fallen either and as a result, few have lost money on their home. In part it is because there was little if any increase in spec building back on ’04, ’05 and ’06 and in part it’s due to Yankee frugality.“ Whatever the cause, house prices have held up well over the past few years. Prices are up 4.7% since the trough in March 2011 and have now surpassed the previous high set in August 2009.
Improving economic conditions have resulted in payroll employment being down just 0.5% from its 10-year high in July 2008 and up by 3.3% since the trough in September 2009. Single family permitting activity is up 2.7% on a seasonally adjusted monthly average basis from the trough set in March 2011. While new homes are being built in many parts of the Rochester MSA, activity has been primarily centered in the towns of Greece, Henrietta, and Penfield in Monroe County as well as southeast of Rochester in the Town of Farmington and the Town of Victor, both of which are in Ontario County. There has also been a small but noticeable pick-up in multifamily activity in downtown Rochester.