The number of markets reaching and exceeding their last normal level of economic and housing activity continues to advance slowly. The January NAHB/First American Leading Markets Index contains 56 markets whose index is at or above one, which means the last 12 months average of single-family housing permits, home prices and employment levels are at or above their last period of normalcy. This is two markets more than the December report.
The national index for January remained at .86, meaning that the US market is 86% of the way back to normal. The number of markets that are at or better than the national average increased by two from 152 to 154 or 44% of the markets evaluated.
The LMI measures the proximity to a normal level of economic and housing activity by combining ratios of three critical indicators of local economic health: single-family housing permits, house prices and employment. The most recent 12 month average is compared to the annual average during the last period of normal growth. For prices and permits, the last normal period was 2000-20003 and for employment it was 2007 just before the recession began.
The housing permit component of the LMI has been the slowest to recover as home building lags the recovery in prices and employment in most markets. Of the 56 markets that have an LMI at or over 1, only 24 have a single-family permit index at or over one implying only about half the ‘recovered’ markets are uniformly recovered in all three indicators.
The markets with index values at or above one are heavily concentrated in energy areas where the local economies have been improving for a longer period and are benefiting from the oil and energy exploration booms. Markets that remain some distance from normal are those that had severe housing collapses either because of overheated housing markets (Nevada, Florida) or fundamental changes in the underlying economies (Michigan).
Even in those markets, progress is being made. About one-third of the 351 markets measured saw an improvement in their LMI from December to January.