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 tenth release 84 markets are currently classified as improving under a conservative examination of local economic and housing market conditions. Among these areas is the Tuscaloosa, Alabama metropolitan statistical area (MSA).
The health of the Tuscaloosa economy, and housing market, is due to Tuscaloosa being the regional center of commerce, healthcare, industry and education for all of West Alabama. With over 8,000 employees and 30,000 students, the University of Alabama serves as the cornerstone of the economy. Healthcare is also a key part of the landscape with DCH Regional Medical Center, Bryce Hospital, the William Partlow Developmental Center and the Tuscaloosa VA Medical Center employing thousands more. Tuscaloosa also has a vibrant manufacturing sector anchored by the Mercedez-Benz automotive assembly plant, a BF Goodrich tire plant, a large Phifer Wire facility, Johnson Controls and many other manufacturers. In addition, coal mining plays an important part in the economic health of the community as do the large number of local, state and federal government agency jobs.
According to home builder Phillip Kinard, Managing Partner of Eagle Properties LLC, “our economy is one that is experiencing consistent mild improvement. Following the tornado of April 27th 2011, there has been a tremendous amount of repair work going on, as well as new construction to replace the thousands of units that were damaged and destroyed. The biggest problem we face is buyers being simply unable to obtain credit. As a result more multifamily rental units are going up, and entry level construction activity is much slower that you would expect. As a matter of fact, we have had to totally reinvent our business model to adapt to the severe credit crisis. He went on to say that “despite the ongoing drag, the economy is improving due to expansion at the University, the Merdeces-Benz plant the local oil refinery, the coal industry and elsewhere.”
Jay Wells, the Western Division Marketing Manager at Alabama Power thinks that people are simply starting to feel more confident about the economy and are thus more willing to spend. “This is probably because a while back we saw local industry start to improve and that lead to a round of hiring and that increase in employment has resulted in increased demand for residential units.” He also feels that the rise in the number of game-day homes being built as investments for fans of the Crimson Tide who want to watch home games live along with substantial construction of multifamily rental units to accommodate the growing student population has also helped. He went on to say “Collectively this construction activity is rippling through the economy and doing a world of good.” Whatever the causes, house prices have held up well over the past few years. Prices are up 1.1% since the trough in February 2011 and are off less than 10% from their all-time high set in July 2008.
Improving economic conditions have resulted in payroll employment being down just 8.9% from its high set in January 2008 and up by 0.9% since the trough in June 2009. Single family permitting activity is up 3.3% on a seasonally adjusted monthly average basis from the trough set in January 2011. While new homes are being built in many parts of the Tuscaloosa, MSA, activity has been primarily centered in the Towns of North River which is situated across the river and north of downtown.