We are going to look at the First American Improving Markets Index in this week’s article, but first I need to make a correction to my article titled Investing in Today’s Real Estate Market, published April 3rd. I stated that NuWire helped create the 2012 Housing Market Forecast which I referenced in that article. I was MISTAKEN. The 2012 Housing Market Forecast was authored by Marco Santarelli of Norada Real Estate Investments and was simply referred to by NuWire. I really appreciate Mr. Santarelli contacting me and pointing out the error.
There are several very positive signs that the market is truly stabilizing. I just recently became aware of the First American Improving Markets Index (IMI). This Index was created in September of 2011 by The National Association of Home Builders (NAHB). The IMI was created to measure the improvement in local housing markets using three key economic indicators. This index clearly helps identify the difference between what is happening nationally versus local markets.
IMI measures three sets of independent monthly data to get a marker on the top improving Metropolitan Statistical Areas (MSAs – as defined in my article Investing in Today’s Real Estate Market). The three indicators analyzed are 1) Employment Growth as measured by the Bureau of Labor Statistics (BLS), 2) Housing Prices as measured by Freddie Mac 3) Single-Family Housing Permit Growth as measured by the U.S. Census Bureau. The criteria are that a MSA must see improvement in all three of these indicators for six consecutive months.
The inaugural index was released on September 7, 2011. At that time, there were 12 MSAs that were included on the list:
- 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
On April 5, 2012 when the Index was released the list had increased to 101 MSAs, which now includes thirty-five states (visit //www.nahb.org/reference_list.aspx?sectionID=2223 to see the complete press release.)
“While housing markets across the country continue to struggle under the weight of overly tight lending conditions and other challenges, the April IMI indicates that at least 101 individual metros are showing measurable and consistent signs that they are headed in the right direction,” said NAHB Chairman Barry Rutenberg. “A total of 35 states are now represented on the list, with 10 states having four or more entries. This positive news is in line with what our builder members have observed regarding firming conditions and improved buyer interest in certain locations.”
“After five consecutive months of gains, the IMI recently began to plateau, with many markets holding steady and a few experiencing the ups-and-downs that are typical in a choppy recovery,” observed NAHB Chief Economist David Crowe. “The IMI is designed to highlight markets that are showing consistent improvement, and those markets that have registered the smallest gains are more susceptible to dropping off the list due to a minor setback in prices, permits or employment,” he explained. At the same time, “as stronger markets approach stability, it will get harder for them to keep charting improvement, which will also limit the expansion of the IMI.”
“The fact that the number and geographic distribution of improving housing markets continued to expand beyond the 100 mark in April bodes well for the start of the spring home buying season, and should be an encouraging sign for those who are considering a home purchase,” added Kurt Pfotenhauer, vice chairman of First American Title Insurance Company.
If you have been sitting on the sidelines, I would say the IMI presents some strong data that suggest you might want to get moving.