The Road to Market Normality

Recovery nationwide is rising at a steady pace and is inching closer to the last-observed state of normalcy in the housing market.

The National Association of Home Builders reported that its First American Leading Markets Index (LMI) rose to 0.95 in the first quarter of 2016, .01 higher than the level recorded in the fourth quarter of 2015 and up .04 from last year.

The NAHB added that the index is now 0.17 point higher than the low of 0.78 reached in March 2012.

To determine the proximity to a normal economic and housing market, the NAHB uses single-family housing permits, employment, and home prices indicators. The index is calculated for both the entire country and for 337 local markets, metropolitan statistical areas (MSAs), and a value of 1.0 means the market, or country, is back to the last level of normality.

On a national level, the three components measure by the NAHB added to the quarterly growth in the nationwide score. The report showed that permits increased from 0.48 to 0.49, prices rose from 1.38 to 1.40, and employment rose from 0.96 to 0.97. Year-over-year, permits, prices, and employment increased by .05, .07, and .02 respectively.

Home building in the U.S. slowed to the slowest pace in seven months after reaching a nine-year high, reflecting growing concerns in the construction sector and adding to inventory worries.

The U.S. Census Bureau and the HUD on Tuesday jointly released new residential construction statistics for March 2016, which showed that privately-owned housing units authorized by building permits in March were at a seasonally adjusted annual rate of 1,086,000, down 7.7 percent from February's rate of 1,177,000, but is 4.6 percent above the March 2015 estimate of 1,038,000. Single-family authorizations in March were at a rate of 727,000; this is 1.2 percent below the revised February figure of 736,000.

A mostly disappointing April jobs report from the Bureau of Labor Statistics today, combined with recent turbulence that includes a 0.5 percent GDP estimate for the first quarter, has many wondering whether another economic slowdown is on the way.

Friday’s April 2016 Employment Situation from the BLS reported 160,000 jobs added during the month, while the unemployment rate held steady from March to April at 5.0 percent. February’s and March’s job gains were both downwardly revised by a combined 19,000 jobs, which brings the average monthly job gain for the three-month period from February through April down to 200,000.

“This weak jobs report follows tepid GDP growth in the first quarter and growing uncertainty about the future by both business and consumers,” Realtor.com Chief Economist Jonathan Smoke said. “The impact of this uncertainty on the spring and summer housing market is not clear. On the one hand, consumers must feel confident about their circumstances and future to make big investments so slowing job growth creates concern. On the other hand, this spring has already produced evidence of substantial pent-up demand rapidly buying up available inventory. If the April report turns into a true declining trend in job creation, we likely won’t see that impact in home sales until the summer.”

Home prices continued to keep their rising pace in March 2016 and are up 40 percent from the bottom hit five years ago, CoreLogic reported in its Home Price Index (HPI) and HPI Forecast.

CoreLogic's data for March showed that home prices are up 6.7 percent year-over-year and 2.1 percent month-over-month. However, national single-family home prices remain 5.4 percent below the peak reached in April 2006 and a new peak is expected to be reached in 2017.

CoreLogic forecasts that home prices for single-family homes will increase by 5.3 percent on a year-over-year basis from March 2016 to March 2017 and will rise 0.7 percent month-over-month basis home prices are expected to increase 0.7 percent from March 2016 to April 2016.

Anand Nallathambi, Pesident and CEO of CoreLogic said, “Home prices reached the bottom five years ago, and since then have appreciated almost 40 percent. The highest appreciation was in the West, where prices continue to increase at double-digit rates.”