The number of metropolitan areas designated as improving by the NAHB/First American Improving Markets Index (IMI) leaped to 201 in December. The index measures the number of markets that have seen an improvement in three primary market indicators, single-family building permits, home prices and employment, for at least six months. The IMI stood at 125 in November and was amplified in December by the addition of 84 new markets and the loss of 8 markets primarily because house prices fell back below a previous low. The 61 percent increase from November to December is the second largest monthly increase in the 16 month history of the index. The index increased 85 percent from 41 to 76 in January 2012.
The increase in the number of markets satisfying the criteria now places at least one MSA on the list in 44 states and the District of Columbia. The broad distribution of markets is an indicator of the breadth of the recovery that has been budding for over a year. A full list of the markets making the list is available here.
When the index was introduced in September 2011, 12 markets were on the list. The number increased steadily until early spring 2012 when the index value dipped to 80 and remained stalled for several months. Since late summer, the index has more than doubled. The softness beginning in early spring and the surge beginning late summer are partially a result of the price component used. Home prices are measured using a not-seasonally adjusted measure produced by Freddie Mac. Unadjusted home prices tend to rise during the spring and summer sales periods and soften during the late fall and winter months. The softness in the index in early spring 2012 was likely a result of that seasonality and we can expect the peak in December may weaken slightly in the coming months.