Inman News
24 July 2015
Freddie Mac and First American data show the under-performance gap is shrinking.
Takeaways:
- The housing market continues to slowly stabilize.
- First American’s existing-home sales capacity model rate decreased by 1.7 percent compared to May and 3.6 percent compared to a year ago.
- Freddie Mac’s Multi-Indicator Market Index hit a value of 79.2 at the end of May — indicating a weak housing market overall but showing an improvement of 0.71 percent compared to April.
Data from two recent indices suggest the housing market continues to slowly stabilize, with the pace of actual home sales and the decreasing pace of growth in the market’s capacity for home sales reducing the overall under-performance gap.
For the month of June, First American’s existing-home sales capacity model rate decreased by 1.7 percent compared to May and 3.6 percent compared to a year ago.
The current under-performance gap is 461,000 existing-home sales at a seasonally adjusted annual rate, which is a significant reduction compared to the sales capacity gap of 1.7 million existing-home sales in February 2014.
“The current market capacity for home sales reflects the influence of slower price appreciation and modestly increased rates,” said Mark Fleming, chief economist at First American.
Freddie Mac’s Multi-Indicator Market Index (MiMi) hit a value of 79.2 at the end of May — indicating a weak housing market overall but showing an improvement of 0.71 percent compared to April. Spanning the past three months, the index value has risen by 2.09 percent. On a year-over-year basis the index’s value has improved by 4.35 percent.
“It’s becoming clearer every month that after several years of local trends largely reflecting national trends, we are getting back to more normal times where local housing markets develop based on their own unique economies,” said Len Kiefer, deputy chief economist for Freddie Mac.
Thirty-eight of the 100 metro areas analyzed by Freddie had MiMi values in a “stable” range during May. The top five were:
- Fresno (95.8)
- Honolulu (93.1)
- Austin (92.8)
- Los Angeles (90.3)
- Salt Lake City (90.1)
The most improving metro areas on a month-over-month basis were Cape Coral, Florida (2.12 percent); Las Vegas (2 percent), Orlando (1.87 percent); Seattle (1.87 percent) and Miami 1.77 percent.
On a year-over-year basis, four of the top five improving metro areas were in Florida:
- Orlando (13.62 percent)
- Palm Bay, Florida (13.23 percent)
- Cape Coral, Florida (13.07 percent)
- Miami (12.90 percent)
Portland, which saw a 12.73 percent rise, was the only non-Florida market to mark the top five.
According to Kiefer, markets throughout Florida showed significant improvement this month not because of robust home-buying activity, but because more borrowers became current on their mortgages.
He noted only a few market showed improved purchase activity. Much like markets in Nevada or Arizona, Florida markets are improving rapidly but still have significant work to do to get back to their benchmark stable ranges.
Twenty-six of the 50 states, plus the District of Columbia, had MiMi values in a stable range during May. The top five:
- Washington, D.C. (100.5)
- North Dakota (96.4)
- Montana (93)
- Hawaii (92.1)
- California (87.7)
The most improved states month-over-month were:
- Washington, D.C. (2.24 percent)
- Nevada (1.88 percent)
- Washington (1.59 percent)
- Arizona (1.58 percent)
- Rhode Island (1.56 percent)
On a year-over-year basis, the most improved states were:
- Oregon (12.58 percent)
- Florida (11.6 percent)
- Nevada (11.2 percent)
- Colorado (nearly 9.5 percent)
- Michigan (8.15 percent)
“Housing markets in the West and Southwest continue to be the bright spot of the recovery and spring home-buying season, with strong purchase activity fueled by an improving local economy and job picture.” Kiefer said.