Energy States Continue to Dominate Leading Markets

The National Association of Home Builders' (NAHB)/First American Leading Market Index (LMI) was unchanged from March to April, remaining at 59 metropolitan areas.  A position on the index indicates that those markets returned to or exceeded their last normal levels of economic activity along three parameters, employment, home prices, and construction activity.

The LMI has gained eleven metropolitan areas over the last year.  There are 350 markets tracked by the index and 28 percent saw their score go up this year and 83 percent have shown improvement in the last 12 months.

The nationwide score for the index in April is .88, up from .87 in March.  This means that the country as a whole is running at 88 percent of normal economic and housing activity.

NAHB and First American Title base the index on housing permit data from the Census Bureau, home price information from Freddie Mac, and employment figures from the Bureau of Labor Statistics.  Each area is scored by taking their average permit, price, and employment levels for the past 12 months and dividing each by their annual average over the last period of normal growth.  For example, 2000-2003 is used for single-family house permits and home prices and 2007 is the base for employment data.  The three components are then averaged to provide an overall score for each market as well as a national level.  An index of 1 would indicate that that market has advanced to equal its previous normal level of economic activity.

Baton Rouge continues to top the major metros with a score of 1.42.  Other areas where activity now exceeds previous norms include Honolulu, Oklahoma City, Austin, Houston, San Jose, and Harrisburg.  Smaller metros ranking high continue to be those dominated by an energy boom.  Topping the list are Midland and Odessa Texas, both over 2.0 or more than double normal activity; Bismarck. North Dakota, Casper Wyoming, and Grand Forks, North Dakota.

"I think the big news here is that regions outside of the energy states continue to gain ground," said NAHB Chief Economist David Crowe. "It's a promising sign to see areas like Los Angeles and San Jose joining the top ten largest MSAs showing a recovery. We still expect 2014 to be a strong year for housing and to aid in the overall economic recovery. The job market continues to mend and with that we will see a steady release of pent up demand of buyers."