The number of U.S. housing markets showing sustained improvement in three key measures fell slightly to 258 in May from 273 in April, according to the NAHB/First American Improving Markets Index (IMI). This total includes entrants from all 50 states and the District of Columbia. The IMI identifies metropolitan areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months.
"The fact that over 70 percent of all U.S. metros are holding onto their spots on the improving list is definitely good news, and representative of the generally brightening outlook for housing markets nationwide," said NAHB Chairman Rick Judson, a home builder from Charlotte, N.C. "That said, our industry's progress on the road to recovery is being slowed by rising challenges related to the availability of credit, building materials, labor and lots for development."
The IMI is designed to track housing markets throughout the country that are showing signs of improving economic health. The index measures three sets of independent monthly data to get a mark on the top Metropolitan Statistical Areas. The three indicators that are analyzed are 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. NAHB uses the latest available data from these sources to generate a list of improving markets. A metro area must see improvement in all three measures for at least six consecutive months following those measures' respective troughs before being included on the improving markets list.
"While seasonal trends in home prices resulted in an overall decline in the IMI this month, the index remains at a very strong level and continues to represent markets in every state," noted NAHB Chief Economist David Crowe. "Some metropolitan areas that had previously charted marginal home-price gains dropped off the list this time as a result of typically softer prices seen in the winter months, which is similar to what the index showed in this same period last year."
Four new markets were added to the list and 19 were dropped from it this month. Newcomers included the geographically diverse metros of Dothan, Ala.; Elizabethtown, Ky.; Salisbury, Md.; and Salem, Ore.
"Today's report shows that the majority of U.S. metros are experiencing strengthening house prices, employment and permitting activity, which is a much more positive picture than the one we were seeing a year ago," said Kurt Pfotenhauer, vice chairman of First American Title Insurance Company. "That's the big picture on which consumers need to focus."