A new National Association of Home Builders/First American Leading Markets Index (LMI) report shows sustained growth across the country, although single-family housing permits continue to struggle.
According the the LMI, multiple Texas metros are leading the way—with Odessa and Midland, Texas coming in one and two respectively on the Top 10 Small MSAs list and Austin-Round Rock, Texas coming in third on the Top 10 Large MSAs List. Topping the Large MSAs list was Baton Rouge, Louisiana. Three Alabama metros also represented the south on the Top 10 Small Metros List: Florence-Muscle Shoals; Gadsden; and Auburn-Opelika. To view more metro breakdowns, click here.
The LMI calculates a market’s health by comparing it to normal economic and housing conditions. LMI tracks three particular factors: home prices, employment, and single-family housing permits. According to this latest report, the LMI Score grew in 84 percent of the tracked areas—282 metropolitan statistical areas—during the third quarter of 2017. The index tracks 337 total local markets and MSAs, and uses this data to assign each area an LMI Score. The nationwide LMI Score has reached 1.03.
A metropolitan area is considered to have normalized when those three components average out to an LMI score of 1.0. LMI Scores now exceed 1.0 in 197 out of the 337 metro areas the index tracks. The number of normalized metro areas has jumped by 40 compared to last year, and by six just since the second quarter of 2017.
The primary driver for recovery in many of these areas appears to be housing prices, which have risen above 1.0 or are normalized in 332 out of 337 markets. Overall, housing prices have normalized in 98.5 percent of the tracked metro areas. Nationwide, the LMI’s house prices component sits at 1.55, easily the strongest performer of the three.
Employment also appears to be stabilizing, with 118 metro areas leveling off in the third quarter of 2017. That’s up by 11 compared to the second-quarter total of 107. However, nationwide the employment component is just shy of 1.0, currently sitting at 0.99.
Single-family permits remain the biggest problem area highlighted by the LMI. The nationwide LMI Score for single-family permits is only at 0.56. Those numbers do fare better in areas where overall economic performance is stronger, however, suggesting that continued economic recovery can drive those numbers up.