Tri-Cities’ April Improving Markets Index above U.S., Johnson City keeps spot in top 10


The April NAHB/First American Leading Market Index was unchanged from March in the Tri-Cities. Nationally it increased one point to .88 from .87 in March.

The index measures how close individual markets and the US market are relative to their last normal market activity.

Johnson City MSA has been ranked among the 10 best in the nation in October since the National Association of Homebuilders replaced its Improving Markets Index with the Leading Markets Index.

Johnson City ranks 1.31 in April, unchanged from March but down 0.01 points since January.

Kingsport-Bristol ranks .89, a point above the national index.

A total of 153 – about half of all markets – were at or above the national index and 59 markets’ indexes were at or above one, meaning those markets had met or exceeded the last period of normal market activity.

The index measures single-family permits, home prices and employment in the past 12 months and divides that by the last normal annual level. For permits and prices, the last normal period is 2000-2003 and for employment 2007.

The weakest area of the index locally is employment. In April 2007 the Johnson City index for employment was 1.44. Currently it’s .92.

In Kingsport-Bristol the April employment number was 1.04. This month it’s .97.

The Tri-Cities has experienced a soft labor market for almost two year. Job losses in the fourth quarter of 2013 were the steepest since days of the Great Recession in 2009. There was a small increase in non-farm jobs this year, but it wasn’t enough to turn the trend, yet.

What has kept the index high in the three-county Johnson City MSA is building permits and home prices. Johnson City was the hot housing market last year for existing home sales and a boom in apartment construction has lifted the city’s new home construction sector to almost pre-recession levels.

Although the labor picture in the four-county Kingsport-Bristol MSA has outperformed the Johnson City MSA, the housing market sectors have been softer. Existing home sales and prices softened in 2013 after reaching pre-recession levels in 2012. Kingsport-Bristol’s new home construction has been slowly improving, but builders say regulatory lending practices have put effectively capped new home construction. That’s not an uncommon situation in small housing markets where almost all of the new homes are spec homes.

The Leading Market Index has been moving higher for two years from a low of .78 in April 2012. A total of 308 markets have recovered to normal in home prices but employment lags. Housing is even further behind; only 24 markets or 7% are back to or above normal levels of single-family permit issuance.

“I think the big news here is that regions outside of the energy states continue to gain ground,” said NAHB Chief Economist David Crowe. “It’s a promising sign to see areas like Los Angeles and San Jose joining the top ten largest MSAs showing a recovery. We still expect 2014 to be a strong year for housing and to aid in the overall economic recovery. The job market continues to mend and with that we will see a steady release of pent-up demand of buyers.”

“Things are getting slowly better overall,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Del. “And with the housing market now entering the spring buying season, the fact that the nation’s economy is headed in the right direction is a very promising sign.”

Smaller metros showing recovery continue to be dominated by the middle of the country experiencing an energy boom.

The LMI shifts the focus from identifying markets that have recently begun to recover, which was the aim of a previous gauge known as the Improving Markets Index, to identifying those areas that are now approaching and exceeding their previous normal levels of economic and housing activity. More than 350 metro areas are scored by taking their average permit, price and employment levels for the past 12 months and dividing each by their annual average over the last period of normal growth. For single-family permits and home prices, 2000-2003 is used as the last normal period, and for employment, 2007 is the base comparison. The three components are then averaged to provide an overall score for each market; a national score is calculated based on national measures of the three metrics. An index value above one indicates that a market has advanced beyond its previous normal level of economic activity.

 

 

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