Information about New Orleans

Pittsburgh and New Orleans Among Those Included

The National Association of Home Builders (NAHB) released its first NAHB/First American Improving Markets Index (IMI), a new economic index revealing metropolitan areas that have shown improvement for at least six months in three key economic areas—housing permits, employment and housing prices.

The list of metropolitan areas includes:

• Alexandria, LA
• Anchorage, AK
• Bangor, ME
• Bismarck, ND
• Casper, WY
• Fairbanks, AK
• Fayetteville, NC
• Houma, LA
• Midland, TX
• New Orleans, LA
• Pittsburgh, PA
• Waco, TX

“Despite the challenging conditions in the national economy and housing sector, there are areas throughout the country where we are seeing pockets of improvement” said Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. “Housing conditions are local, and do not always reflect the national picture. We created this new index to shine a light on those housing markets across the country that have stabilized and have begun to show signs of recovery.”

“By examining key indicators of home prices, employment and housing permits data, we are using a comprehensive, but conservative method in determining which markets are improving,” said NAHB Chief Economist David Crowe. “Last year at this time, there was not a single market that showed improvement using these criteria, and now we can point to 12 examples of growth.”

“It’s not surprising that many of the states represented are energy rich areas,” Crowe continued. “Those are the regions still experiencing relatively strong employment, supporting housing demand.”

The IMI is designed to track housing markets throughout the country that are showing signs of improving economic health. The index measures three sets of independent monthly data to get a mark on the top improving Metropolitan Statistical Areas. The three indicators that are analyzed are employment growth from the Bureau of Labor Statistics, house price appreciation from Freddie Mac, and single-family housing permit growth from the U.S. Census Bureau. A metro area must see improvement in all three areas for at least six months following their respective troughs before being included on the improving markets list. NAHB uses the latest available data from these sources to generate the list of improving markets.

Please visit www.nahb.org/imi for additional data, tables and a list of 2011 future economic release dates.


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       Data from the University of New Orleans shows home sales in the five-parish North Shore region climbed slightly in the first nine months of 2010. The numbers indicate a slight nudge for the market that saw a slowdown in activity during the height of the national economic collapse.

       UNO’s Institute for Economic Development Director Ivan Miestchovich said the trends through the first three quarters of 2010 signal upward momentum in the single family housing market and a slowdown in the rate at which home prices in the region are falling.

       Between January and September, 3,019 single family units were sold in the North Shore region compared with 2,845 in the same span of 2009. Average prices fell just less than 3.5 percent, or from $200,426 in 2009 to $193,435 last year.

       The report also provides an overview of economic trends along the Interstate 12 corridor, which includes St. Tammany, Tangipahoa, Livingston, Washington and St. Helena parishes.

       The region lost 3,430 jobs, or 2.3 percent, between the first quarter of 2009 and the first quarter of 2010. Tangipahoa Parish accounted for the largest share with 1,395 jobs, followed by St. Tammany with 1,170 jobs.

       Those job sectors with the largest jobs losses were construction (1,051) retail (997) and manufacturing (986).

       During the same time frame, industries adding jobs on the North Shore were health care and social assistance (594) and professional, scientific and technical services (154).

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       Housing has turned the corner of the worst downturn in more than 60 years, but the market is still grappling with high unemployment and sharply lower home prices, according to “The State of the Nation’s Housing 2010,” which was released by the Joint Center for Housing Studies of Harvard University on June 14.

       “The strength of job growth is now key to how quickly loan distress subsides and how fully markets recover,” the report says.

       “If history is a guide, what happens with jobs will matter the most to the strength of the housing rebound,” says Eric Belsky, executive director of the Joint Center. “Right now, economists expect the unemployment rate to stay high, but if employment growth surprises on the upside or downside, housing numbers could too.”

       First-time home buyers drove the improvements that began to be seen by the middle of last year, triggered by improved affordability and the first-time home buyer tax credit, and they were responsible for all of the gains in existing home sales in 2009, the study says.

       “As a result of lower home prices and interest rates, mortgage payments on a median-priced home (assuming a 90% loan-to-value ratio) dropped below 20% of median household income — the lowest level on record dating back to 1971,” according to the center.

       The report notes that in April there were 7.8 million fewer jobs than in December 2007, and “unfortunately, most economists predict that the unemployment rate will remain elevated as discouraged workers reenter the labor force amid slow gains in jobs.”

       The overhang of vacant units for rent, for sale or held off the market is another “serious concern,” the report says.
 
       “Despite production cuts of more than 70% since 2005, the overall vacancy rate hit a record in 2009. In addition, many current owners are effectively trapped in homes that are worth less than the amount owed on their mortgages. If these distressed owners want or need to sell, their only choices are to walk away from their homes or write a check at the closing table. This will inhibit a recovery in repeat home sales.”

       Citing statistics from First American CoreLogic, the center says that falling home prices left 11.2 million home owners underwater on their loans — with no home equity and unable to tap traditional markets — as of the end of the first quarter of 2010. Housing was adding significantly less to the pocketbooks of consumers, as well, with Freddie Mac reporting that total real home equity cashed out at refinancing dropped 25% in 2009 and stood below $80 billion for the first time since 2000.

       The housing market will also have to weather the expiration of the home buyer tax credit, but the report suggests that the improving labor market may enable housing to avoid a dip similar to what occurred when the first round of credits expired in the fall of 2009.

Declining Incomes and Wealth

       At the outset of the recovery, home builders are also having to contend with a noticeable decline in the income and household wealth of their prospective buyers.

       “After at least three decades of progress, real median household income will almost certainly end the 2000s lower than they started,” the study says. “At last measure, the median for all households was $49,800 in 2008, down from $52,400 in 2000. Even at their last cyclical peak in 2007, real median incomes were 1.2% below 2000 levels.”

       The household wealth of households slid from $503,500 to $486,600 over the decade, according to Harvard.

       “While growth in stock wealth has already started to pick up, housing wealth will take a slower path to recovery. Indeed, despite some painful foreclosure-driven deleveraging, mortgage debt has never been higher relative to home equity. After an $8.2 trillion plunge in housing wealth since the end of 2005, mortgage debt entered 2010 at 163% of home equity.”

       Even outside the cyclical decline in income and wealth, the financial wherewithal of prospective buyers will be a concern for the housing market in the period ahead as it becomes increasingly diverse.

       “At last measure in 2007, minorities accounted for fully 35% of first-time home buyers and 20% of repeat buyers even in the middle of the housing bust. The immigrant share of first-time buyers was 19% and of repeat buyers 12%.”

       The report says that “minority households have lower median incomes than white households. For example, the median income for 35-44 year-old minority-headed households was $45,000 in 2008, compared with $72,900 for whites.”

The Return of Household Growth

       The most optimistic news from this year’s report comes from a longer-range assessment of household growth.

       While there has been much discussion of the impact of the recession on household growth, “it is difficult to judge how big those effects have actually been,” according to the center. The cumulative slowdown over the past four years appears to range from 1.0 million to 2.8 million.

       “The reality could, however, be even worse because household growth estimates depend heavily on net immigration, which is particularly difficult to assess in and around an economic recession.”

       The report observes that it is also hard to sort out how much of the slowdown in household formations has been due to reduced immigration and how much to lower household formation rates caused by doubling up.

       The Current Population Survey from the Bureau of Labor Statistics and the Census Bureau shows foreign-born households under the age of 35 declining by 338,400 from March 2007 to March 2009, compared to a drop of only 2,100 native-born households of the same age.

       “On the other hand, the survey also indicates that headship rates among young adults as a whole declined in the late 2000s, consistent with the expected effects of soaring unemployment within that age group. At the same time, the survey also shows some drop-off in headship rates in older age groups,” the report says.

       “In any case, headship rates may not remain depressed for long given dramatic improvements in affordability for first-time buyers who have jobs, softening rents due to high rental vacancies and the expectation that household growth will return to long-term trend levels when employment growth quickens.

       “But assuming headship rates remain at their slightly lower 2008 levels and that net immigration recovers to its 2000-2005 pace, household growth will average about 1.48 million annually in 2010 to 2020. Even if immigration falls to half the Census Bureau’s currently projected rate, household growth will still average about 1.25 million annually.

       “This low-end estimate puts household growth in the next 10 years on par with the pace in 1995 to 2005, and should support average annual housing completions and manufactured home placements of well over 1.7 million units. The higher-end estimate would likely support production exceeding 1.9 million units per year on average over the coming decade.”

       The study also indicates that builders should be on the lookout for retiring baby boomers, the oldest of whom are just turning 64, with millions soon to follow.

       “Despite their losses in wealth caused by the correction in home and stock prices, the baby boomers will drive demand for senior housing suited to active lifestyles as well as for assisted living facilities,” the report says.

      NAHB and the National Housing Endowment were among the organizations providing funding for the report.

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