As the housing market goes, so goes the broader U.S. economy.
The housing market bottomed in October 2011 and has since shown steady, consistent growth. It’s no surprise, therefore, that the U.S. economy has done the same, creating a definitive end to last decade’s recession.
According to the National Association of Home Builders (NAHB), the economic revival is spreading from city-to-city. Two-thirds of the country’s major metropolitan areas are now “improving” — a term reserved for cities meeting specific growth metrics. It’s a more than 3-fold improvement over just one year ago.
The 2013 economy and housing market is a strong one.
Improving Market Index : “Measurable And Sustained Growth”
Each month, the National Association of Homebuilders publishes its Improving Market Index (IMI), a report which highlights metropolitan area in which general general economic growth is occurring.
In this way, the IMI is not a housing market metric, nor it is home valuation tracker as one might classify the S&P Case-Shiller Index or the Federal Home Finance Agency’s Home Price Index; which may report such housing market facts as “home prices are rising in Seattle, Washington”.
Rather, the NAHB’s Improving Market Index pools three separate data series for each of its 361 U.S. metropolitan areas and determine whether the local economy of is currently expanding or contracting. Only when each of the three data points can demonstrate measurable and sustained growth will the NAHB deem the area “improving”.
The Improving Market Index uses the following three data series :
- Employment data from the Bureau of Labor Statistics
- Home Price Growth from Freddie Mac
- Single-Family Housing Growth from the U.S. Census Bureau
To be considered “improving” and to be included on the NAHB Improving Market Index list, a given metropolitan area must show growth in each of the three series from the immediate month prior, and at least six months must have passed since each of the series’ most recent troughs.
Los Angeles, California; Chicago, Illinois Improving
The number of U.S. metropolitan areas on the NAHB Improving Markets Index list climbed by 41 in January to 242 overall. There are 361 metropolitan area tracked, in total
Cities newly-added to the IMI for January 2013 include :
- Los Angeles, California
- Chicago, Illinois
- Boston, Massachusetts
- Cleveland, Ohio
- Charleston, South Carolina
The inclusion of these 5 cities on the Improving Market Index list is significant because each was hit hard during last decade’s housing market downtown, as were the following five cities which have maintained their “improving” classification for January :
- Phoenix, Arizona
- San Francisco, California
- Las Vegas, Nevada
- Cincinnati, Ohio
- Philadelphia, Pennsylvania
The January 2013 Improving Market Index includes cities from 48 states, and the District of Columbia. 47 new metropolitan areas were added to the index for January. Just 6 dropped off.
Get Today’s Mortgage Rates
For bona fide real estate investors and today’s active home buyers, the Improving Market Index can serve as a real estate opportunity roadmap. It lists cities experiencing broad-based economic growth which, not surprisingly, may also be good cities in which to invest in real estate.
The IMI may also hint at those cities in which home inventories will decline. With rising employment, the buyer pools get bigger and home supply can get scarce, leading home price higher. Even with low downpayment options such as the FHA’s 3.5 percent downpayment program, with higher home prices come higher required downpayments.
Regardless, home prices are rising in most U.S. markets and mortgage rates appear poised to follow. If your 2013 housing plans include buying new property, you may find your best mortgage rates and lowest long-term costs by acting sooner rather than later. Get started with a rate quote. See how today’s mortgage rates can fit your household budget.