“Normal” might be back on the horizon for many U.S. housing markets.

In the first quarter of 2015, 68 of the nation’s 360 metro areas returned to or exceeded their last normal levels of economic and housing activity, according to the latest National Association of Home Builders/First American Leading Markets Index (LMI). That’s a gain of seven markets since last year.

Nationwide, the index now stands at .91, which means the U.S. is running at 91 percent of normal economic and housing activity based on current permit, price and employment data. Meanwhile, 68 percent of markets have shown an improvement year-over-year.

“The markets are continuing to make gains,” said NAHB Chairperson Tom Woods, a home builder from Blue Springs, Mo. “A strengthening economy and low interest rates should spur the release of pent-up demand and keep housing moving forward this year.”
Baton Rouge, La., continues to top the list of major metros on the LMI, with a score of 1.43.

That’s 43 percent better than its last normal market level. Other major metros doing well include Austin, Texas; Honolulu; Houston; and Oklahoma City. The rest of the top 10 is San Jose, Calif.; Los Angeles; Salt Lake City; Charleston, S.C.; and Nashville, Tenn.

“The strongest gain is employment, where the number of metros that reached or surpassed their norms nearly doubled in a year,” says NAHB chief economist David Crowe. “Despite a minor uptick in single-family permits, only 7 percent of the markets are at or above their normal permit activity.”

“The number of markets on this quarter’s Leading Markets Index at or above 90 percent of previous normal levels has reached 157 – a sign that the recovery is spreading to a wide range of markets,” says Kurt Pfotenhauer, vice chairman of First American Title Insurance Company, which co-sponsors the LMI report.

Among smaller metros, both Midland and Odessa, Texas, have LMI scores of 2.0 or better, meaning their markets are now at double their strength prior to the recession. Also leading the list of smaller metros are Manhattan, Kan.; Grand Forks, N.D; and Casper, Wyo., respectively.

For single-family permits and home prices, 2000-2003 is used as the last normal period for the LMI, 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.

NAHB uses employment data from the Bureau of Labor Statistics, house price appreciation data from Freddie Mac and single-family housing permits from the U.S. Census Bureau to calculate the LMI. The LMI is published quarterly.

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