Improving Markets List Shrinks; Mortgage Rates 'Very Favorable'

The number of metropolitan areas listed as "improving" by the National Association of Home Builders (NAHB) and First American Title fell slightly in July. There were 255 markets that met the definition for inclusion on the Improving Markets Index (IMI) compared to 263 in June. The new number still remains more than triple the number on the list one year ago.

"This is the sixth straight month in which at least 70 percent of all U.S. metros have qualified for the Improving Markets Index," observed NAHB Chairman Rick Judson. "The relative stability of the IMI is representative of the broad recovery underway, which is much more extensive than what we were looking at one year ago."

The NAHB/First American list is comprised of cities that have shown six consecutive months of improvement from their respective troughs in three economic areas, housing starts, employment, and home prices. Six new markets were added to the list in July while 14 were dropped. New Markets are Cumberland, Maryland; Saginaw, Michigan; Farmington and Las Cruces, New Mexico; Kingston, New York; and Olympia, Washington. Thirteen of the fourteen cities that dropped from the list (St. Joseph, Missouri being the exception) were east of the Mississippi and there were two cities each in Alabama, Georgia, and Ohio.

"Despite slight ups and downs in recent IMI levels, an overwhelming majority of U.S. metros -- including those located in almost every state -- remain solidly on the path to recovery even as the pace of their improvement is slowed by ongoing challenges related to the availability of credit, labor, lots and certain building materials," added NAHB Chief Economist David Crowe. "Based on recent trends in home prices, housing permits and employment, the outlook for a continued housing expansion remains very positive for the remainder of 2013."

Despite growing concern that the recent spike in mortgage rates could hinder the housing recovery, First American's Kurt Pfotenhauer framed them in a positive light. "The fact that more than two-thirds of all U.S. housing markets continue to be represented on the improving list should be a boon to consumer confidence at a time when many are looking to take advantage of today's very favorable mortgage rates," observed Pfotenhauer.

The IMI uses three sets of data as measures; employment growth from the Bureau of Labor Statistics, house price appreciation from Freddie Mac and single-family housing permit growth from the U.S. Census Bureau.