Real Estate Market

NAHB index reveals 12 recovering metros among 360 examined

by Broderick Perkins

(9/30/2011) Erate Exclusive - On the lookout for closing windows of opportunity in the home buying and investment markets? Keep an eye on a new index that pinpoints housing markets that may be about to boom.

It's an index to watch, because once it says a housing market is on the road to recovery, bottom-market buying and investment bargains could be in the rear view mirror.

Prices could remain relatively low for anointed metros that make the cut, given the generally slow recovery pace of the housing market. However, a required six-month seasoning period of growth means the very best prices in a given metro likely will be history.

Once the word is out, you may have to move fast to cash in.

The National Association of Homebuilders' American Improving Markets Index (IMI) Is an economic index of metropolitan areas that have shown improvement for at least six months in three key economic areas -- housing permits, employment and housing prices.

"Despite the challenging conditions in the national economy and housing sector, there are areas throughout the country where we are seeing pockets of improvement," said Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev.

"Housing conditions are local, and do not always reflect the national picture. We created this new index to shine a light on those housing markets across the country that have stabilized and have begun to show signs of recovery," Nielsen added.

Metros on the index's inaugural list include three from Louisiana, and two each from the big states of Texas and Alaska, but reveal no particular geographic trend.

To the contrary, indicating the spotty nature of recovery for the housing market nationwide, among 360 Metropolitan Statistical Areas examined, only 12 locations made the first list for hottest IMI metros. They were:

• Alexandria, LA
• Anchorage, AK
• Bangor, ME
• Bismarck, ND
• Casper, WY
• Fairbanks, AK
• Fayetteville, NC
• Houma, LA
• Midland, TX
• New Orleans, LA
• Pittsburgh, PA
• Waco, TX

The index uses single-family housing permit growth data from the U.S. Census Bureau. Employment growth data comes from the U.S. Bureau of Labor Statistics and home price appreciation from Freddie Mac.

In all three cases, NAHB crunches the latest available data from these sources to generate the list of improving markets.

NAHB said a metro area can't make it to the list unless it sees improvement all three areas for at least six months following a respective market's bottom.

"By examining key indicators of home prices, employment and housing permits data, we are using a comprehensive, but conservative method in determining which markets are improving," said NAHB chief economist David Crowe.

For each area, calculations are the product of:

• The current three-month moving average in single-family housing permits, divided by the three-month moving average that ends with the bottom of the market in single family permits, divided by the number of months since the bottom of the market.

• The current number of jobs divided by the number of jobs at the bottom of the market. • The current price index, divided by the index value at the bottom of the market. If there has been no bottom market, the value is zero.

"Last year at this time, there was not a single market that showed improvement using these criteria, and now we can point to 12 examples of growth," Crowe added.

Crowe said many areas on the move are considered energy-rich areas and, as such, are an important natural resource area at a time when energy comes at a premium.

"Those are the regions still experiencing relatively strong employment, supporting housing demand," Crowe said.

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