Housing Index Hits Milestone, but Permits Still Lagging

May 4th, 2017 by Editor

Based on current price, permit and employment data, markets nationwide are running at an average of 100 percent normal economic and housing activity, according to the National Association of Home Builders/First American Leading Markets Index (LMI), released today.

However, individual components of the LMI are at different stages of recovery. While employment has reached 98 percent of normal activity and home price levels are well above normal at 150 percent, single-family permits are running at just 53 percent of normal activity.

“Single-family permits have inched up slowly as builders continue to face supply-side headwinds such as ongoing price hikes in building materials, a lack of buildable lots and labor shortages,” said NAHB chief economist Robert Dietz. “A proposal by the Department of Commerce to impose a 20-percent duty on Canadian lumber would only exacerbate this problem, and slow down the already modest growth in housing permits.”

“This is the first time the LMI has reached this key milestone and it shows how much our industry has improved since the depth of the Great Recession,” said NAHB chair Granger MacDonald, a home builder and developer from Kerrville, Texas. “However, we are concerned that single-family permits continue to trail the other components of the LMI and remain at only halfway back to normal.”

Despite these challenges, the housing market continues to gradually move forward. The LMI shows that markets in 183 of the approximately 340 metro areas nationwide returned to or exceeded their last normal levels of economic and housing activity in the first quarter of 2017. This represents a year-over-year net gain of 67 markets.

“Nearly three-quarters of all metros saw their Leading Markets Index rise over the quarter, a sign that the overall housing market continues to make broad-based gains,” said Kurt Pfotenhauer, vice chairman of First American Title Insurance Company, which co-sponsors the LMI report.

Baton Rouge, La., continues to top the list of major metros on the LMI, with a score of 1.76 — or 76 percent better than its historical normal market level. Other major metros leading the group include Austin, Texas; Honolulu; Provo, Utah; and San Jose, Calif. Rounding out the top 10 are Spokane, Wash.; Nashville, Tenn.; Los Angeles; Charleston, S.C.; and Salt Lake City.

Among smaller metros, Odessa, Texas, has an LMI score of 2.18, meaning that it is now at more than double its market strength prior to the recession. Also at the top of that list are Midland, Texas; Ithaca, N.Y.; Walla, Walla, Wash.; and Florence, Ala.

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