Healthiest housing market since 2001

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by G. Steven Bray

I read an interesting report from Nationwide Insurance’s economics group this past week that claimed the housing market is the healthiest it’s been since 2001. Let’s take a look at how they came to this conclusion.

The report’s authors calculate a value they call the Leading Index of Healthy Housing Markets (LIHHM) using employment, demographic, mortgage, and home price data for the national and individual housing markets. They claim a market’s score, which ranges from 75 to 125, indicates the relative health of that market. A score of 100 is neutral, and scores above 100 indicates a healthy market.

The current value for the national market is 109.8, which the authors conclude indicates a housing market unlikely to enter another downturn soon. Further, they find that only two of 373 metro areas have negative scores at this time. Positive contributors to the index included employment gains and higher home prices. In addition, they cite a pick-up in household formation.

Interestingly, these results are a bit at odds with Freddie Mac’s Multi-Indictor Market Index (MIMI). The national MIMI score in Jan was 74.6, a level Freddie says indicates a weak housing market.

Regardless of which report you believe, what may be more interesting is the trend, and both indices show year-over-year improvement.

Click here for the Nationwide Insurance report.

Click here for the Freddie Mac report.