Home values are well above normal at 150% and single-family permits are running at just 53% of normal activity, according to the latest National Association of Home Builders/First American Leading Markets Index (LMI).
Permit and employment data shows that markets across the country are running at an average of 100% normal economic and housing activity.
Baton Rouge, Louisianna is the top metro area in the nation with an LMI score of 1.76 – or 76% better than its historical normal market level. Other major metros topping the list include Austin, Texas; Honolulu; Provo, Utah; and San Jose, Calif. Rounding out the top 10 are Spokane, Wash.; Nashville, Tenn.; Los Angeles; Charleston, S.C.; and Salt Lake City.
Among smaller metros, Odessa, Texas, has an LMI score of 2.18, meaning that it is now at more than double its market strength prior to the recession. Also at the top of that list are Midland, Texas; Ithaca, N.Y.; Walla Walla, Wash.; and Florence, Ala.
“Single-family permits have inched up slowly as builders continue to face supply-side headwinds such as ongoing price hikes in building materials, a lack of buildable lots and labor shortages,” said NAHB Chief Economist Robert Dietz. “A proposal by the Department of Commerce to impose a 20 percent duty on Canadian lumber would only exacerbate this problem and slow down the already modest growth in housing permits.”
“This is the first time the LMI has reached this key milestone and it shows how much our industry has improved since the depth of the Great Recession,” said NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas. “However, we are concerned that single-family permits continue to trail the other components of the LMI and remain at only halfway back to normal.”
Despite these challenges, the housing market continues to gradually move forward. The LMI shows that markets in 183 of the approximately 340 metro areas nationwide returned to or exceeded their last normal levels of economic and housing activity in the first quarter of 2017. This represents a year-over-year net gain of 67 markets.
“Nearly three-quarters of all metros saw their Leading Markets Index rise over the quarter, a sign that the overall housing market continues to make broad-based gains,” said Kurt Pfotenhauer, vice chairman of First American Title Insurance Company, which co-sponsors the LMI report.