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With 2015 winding down, prospective homebuyers and sellers are eagerly looking forward to the New Year. Nationwide Economics’ Health of Housing Markets (HoHM) Report brings good tidings with its Leading Index of Healthy Housing Markets (LIHHM). Calculated based on factors like employment, demographics, mortgage market and home prices, the study covers the national housing market and 400 metropolitan statistical areas (MSAs).
According to data collected in the third quarter of 2015, the national LIHHM is still higher than 100, the neutral level; this translates to a healthy outlook for the housing market in 2016. Even though the LIHHM, at 108.2, is a tad lower than earlier quarters, a reading over 100 is considered a positive sign. The slight dip was caused by an increase in home prices, which in turn reduced affordability. The study does affirm that the MSA LIHHM performance has been on the rise since 2012.
At a regional level, most of the MSAs are robust and project a positive trend for the coming year. Twenty-three MSAs including Springfield, IL, Niles-Benton Harbor, MI and Milwaukee, WI have +3 performance ranking, a strong indication of a healthy market. About 167 metropolitan markets have a +2 ranking, showing that almost half the MSAs are doing well.
The 10 percent falling under the neutral category do not deter the trend. The only regions that show a drop are energy-intensive states like Louisiana, Wyoming, South Dakota and Texas. Unfortunately, these regions will not see much progress in the coming quarters.
The study indicates that unemployment rates have been on the decline in 90 percent of the MSAs. More jobs translate to an increase in income, which in turn raises the demand for housing.
The last quarter has shown positive trends but does it change when we put the entire year into perspective? In 2014, a majority of MSAs were positive and that has helped keep more than 50 percent of the ranking unchanged for 2015. This is a strong indicator of the direction in which the housing market is moving. Also, only seven MSAs showed a marked decline this year, which is an improvement over previous quarters.
With these trends to build on, we are hoping the New Year will be rewarding for all in the housing continuum.
Read the complete Nationwide’s Health of Housing Markets (HoHM) Report.