The July NAHB/First American Improving Markets Index dropped slightly to 255 from 263 in June as 14 metropolitan areas were dropped from the list and six were added. The number of markets that are improving remains at over 70 percent of all metropolitan areas with sufficient data (361). The majority of the dropped metro areas had weak house price growth as of the June report and those prices fell back below the previous low for the July report. In June their reported average price growth was less than 1 percent while the metros that remained on the list have an average house price growth of 6.6 percent.
The relative peaking in the IMI at about 70 percent of all metropolitan areas for the past six months is a natural outcome of a full national recovery while a few markets sustain just enough growth to qualify but slip back from that marginal growth. Over the nearly two years of the index, 94 percent of eligible metropolitan areas have appeared on the list. The factor that usually knocks a market off the list is house price appreciation and rarely is it more than one of the three factors. House prices are not seasonally adjusted so some weakness parallels the cyclic trend for house prices to soften in winter months.
Every state except Connecticut has at least one metropolitan area on the list, although two counties within Connecticut are within the New York MSA which is on the list.
As the housing recovery spreads to most markets, the index will likely remain above the 70 percent mark but marginal growth in one or more of the three indicators (house prices, single-family permits and employment) may move the slower moving markets on and off the list.