A total of 247 metropolitan areas across 49 states and the District of Columbia qualified for inclusion on the National Association of Home Builders/First American Improving Markets Index (IMI) for August was released. While this is eight metros shy of the number listed on the IMI in July, it is approximately three times the number of metros that qualified for the list in August of 2012.
"In all, 244 metros that were listed as improving in July retained that status in August, and this is an encouraging sign of the continuing housing recovery," said NAHB Chairman Rick Judson, a home builder from Charlotte, N.C. "That said, we know that the pace of improvement is being hampered somewhat by challenges that builders and buyers are experiencing with regard to the availability of credit, materials, lots for development and labor."
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. Three new markets were added to the list and 11 dropped from it in August. Newly added metros this month include Kankakee, Ill., along with Atlantic City and Ocean City, N.J.
"While the number of improving housing markets this August remains well ahead of the same month last year, the index is affected by seasonal softening in home prices just as we saw happen in 2012. The metros that fell off the list this month originally qualified with very small home price improvements that have since slipped back," explained NAHB Chief Economist David Crowe. "As house prices return to more normal levels in fully recovered markets, further IMI advancements will be more modest."
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.
"Even with the small decline in the IMI this month, close to 70 percent of all U.S. metros are represented, and the geographic distribution of entrants continues to be very widespread," said Kurt Pfotenhauer, vice chairman of First American Title Insurance Company. "These facts should be reassuring to today's prospective homebuyers."