Nationwide’s Health of Housing
Markets (HoHM) Report
Nationwide Economics
2015 Q1
Data as of 2014 Q4
HoHM Report Executive Summary:
• Th
The national
ti
l LIHHM* shows
h
that
th t the
th overall
ll housing
h
i
market
k t is
i
healthier than at any time since 2001 (earliest available data),
suggesting that there is little reason to fear a national housing
downturn over the next year.
• Regionally, the LIHHM performance rankings show that the housing
markets in the vast majority of metropolitan statistical areas (MSAs)
are healthy. This suggests that few regional housing markets are
vulnerable to a housing downturn in the next year.
• None of the housing markets in the nation’s largest 40 MSAs are in
negative territory, and only six of them are even neutral. The
healthiest housing markets in the nation are in Pittsburgh, Cleveland,
and Philadelphia.
• Only two MSAs in the nation are in negative territory (Bismarck, ND
and Atlantic City, NJ), and even these are nearly in the neutral zone.
* Leading Index of Healthy Housing Markets (LIHHM): A data-driven view of the near-term
performance of housing markets based upon current health indicators for the national housing
market and 373 metropolitan statistical areas (MSAs) and divisions across the country.
See more at www.InTheNation.com/housing
HoHM Report 2015 Q1
The national LIHHM is at a record high, suggesting a healthy national housing market
The current value for the national LIHHM is 109.8, a modest increase from the previous quarter and the
highest level in its history (data back to 2001). An index value over 100 suggests that the national housing
market is healthy, with lower chances of a housing downturn over the next year as the index moves
increasingly above the 100 breakeven value. In the fourth quarter, the employment, mortgage market, and
house price growth components of the LIHHM remained positive. Household formations increased at a
faster pace, but a continued tight mortgage lending environment remains an impediment to even stronger
national housing activity. Regionally, the LIHHM performance rankings show that the majority of
metropolitan
t
lit
statistical
t ti ti l areas (MSAs)
(MSA ) across th
the country
t are h
healthy,
lth with
ith only
l ttwo iin negative
ti tterritory,
it
indicating that few regional housing markets are vulnerable to a housing downturn in the near term.
National LIHHM
LIHHM Scores*
125
125
120
120
115
115
110
110
105
105
100
100
95
95
90
90
85
85
80
80
75
75
POSITIVE
100
NEUTRAL
75
NEGATIVE
Performance
Rankings*
MSA LIHHM Performance Rankings
400
350
Number of M
MSAs
125
+4
POSITIVE
0
NEUTRAL
300
250
200
150
100
50
-4
0
* See appendix for full descriptions
NEGATIVE
See more at www.InTheNation.com/housing
Nationwide Economics
Page 2
HoHM Report 2015 Q1
The regional LIHHM rankings show that the vast majority of local housing markets are healthy
•
•
•
The LIHHM rankings are generally highest in the Midwest and Northeast, indicating that these are the
regions that are least likely to have a housing downturn in the near term.
Current LIHHM performance rankings are negative (but only slightly) in just two MSAs, while about 15
percent are neutral – indicating only a modest risk of a downturn in these areas over the next year.
Six MSAs are in the +3 ranking (very healthy), with more than 100 in the +2 ranking – many of which
just missed being in the top 10. Among the bottom 10, only two were in negative territory – with the
rest in the neutral zone (suggesting that bottom 10 isn’t all that bad today).
Performance
Rankings†
+4
POSITIVE
0
NEUTRAL
-4
NEGATIVE
Top 10 MSAs
†
Bottom 10 MSAs
Rank
Metropolitan Statistical Area
Rank
Metropolitan Statistical Area
1
Pittsburgh PA
373
Bismarck ND
2
Cleveland-Elyria OH
372
Atlantic City-Hammonton NJ
3
Philadelphia PA
371
New Orleans-Metairie LA
4
Rockford IL
370
Lafayette LA
5
Burlington NC
369
Casper WY
6
Scranton-Wilkes-Barre PA
368
Ocean City NJ
7
Fayetteville-Springdale AR-MO
367
Austin-Round Rock TX
8
Idaho Falls ID
366
Monroe LA
9
Tulsa OK
365
Dallas-Plano-Irving TX
10
Kennewick-Richland
Kennewick
Richland WA
364
Houston TX
Data as of 2014 Q4
Nationwide Economics
Page 3
HoHM Report 2015 Q1
None of the top 40* MSAs have a LIHHM performance ranking that is negative, and only six are even
neutral,
l suggesting that
h the
h major U.S. housing
h
markets
k
are healthy
h l h with
h little
l l chance
h
off a downturn
d
in
the near term in most of them.
Performance Rankings
MSAs by size
(Top 40), with
corresponding
performance
rankings
P f
Performance
Rankings:
R ki
+4
POSITIVE
0
NEUTRAL
-4
NEGATIVE
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
Metropolitan Statistical Area
New York-Jersey City-White Plains NY-NJ
Los Angeles-Long Beach-Glendale CA
Chicago-Naperville-Arlington Heights IL
Houston-The Woodlands-Sugar Land TX
Atlanta-Sandy Springs-Roswell GA
Washington-Arlington-Alexandria DC-VA
Dallas-Plano-Irving TX
Phoenix-Mesa-Scottsdale AZ
Philadelphia PA
Riverside-San Bernardino-Ontario CA
Minneapolis-St. Paul-Bloomington MN-WI
Tampa-St. Petersburg-Clearwater FL
St Louis MO-IL
San Diego-Carlsbad CA
Seattle-Bellevue-Everett WA
Denver-Aurora-Lakewood CO
Baltimore-Columbia-Towson MD
Anaheim-Santa Ana-Irvine CA
Warren-Troy-Farmington Hills MI
Pittsburgh PA
Oakland-Hayward-Berkeley CA
Nassau County-Suffolk County NY
Portland-Vancouver-Hillsboro OR-WA
Mi i Mi i Beach-Kendall
Miami-Miami
B
h K d ll FL
Orlando-Kissimmee-Sanford FL
Cincinnati OH-KY-IN
Fort Worth-Arlington TX
Cleveland-Elyria OH
Kansas City MO-KS
San Antonio-New Braunfels TX
Sacramento-Roseville-Arden-Arcade CA
Newark NJ-PA
Las Vegas-Henderson-Paradise NV
Boston MA
Columbus OH
Charlotte-Concord-Gastonia NC-SC
Austin-Round Rock TX
San Francisco-Redwood City-CA
Indianapolis-Carmel-Anderson IN
Fort Lauderdale-Pompano Beach-FL
† Data as of 2014 Q4
* Largest 40 determined by number of households
Nationwide Economics
Current†
Prior Qtr
Prior Year
1
1
2
0
1
0
0
0
3
1
2
1
2
1
1
1
1
1
1
3
1
1
1
2
2
2
1
3
1
1
1
2
1
1
2
2
0
0
2
2
1
1
2
0
1
1
0
1
2
1
2
1
2
2
1
1
2
1
1
3
1
1
1
2
2
2
1
2
1
1
1
2
1
2
1
2
0
1
2
2
1
0
1
0
1
1
0
1
2
1
2
1
2
1
1
2
2
0
1
2
1
2
1
1
1
2
1
2
1
2
1
2
1
1
2
2
0
1
2
2
Page 4
HoHM Report 2015 Q1
LIHHM as a leading indicator of the housing bust
The last economic expansion (2001-2007) created an unprecedented housing boom, with house prices
peaking in 2006 – up by more than 70 percent over this period. The LIHHM (as shown by the national
index falling below 100 early in 2005 and the vast majority of MSAs falling into negative LIHHM
performance rankings by the fourth quarter of that year) suggested that the national and almost all the
regional housing markets were not healthy and that a housing downturn was likely.
Data as of
2005 Q4
Performance Rankings:
+4
POSITIVE
0
NEUTRAL
-4
NEGATIVE
LIHHM as a leading indicator of the housing recovery
Following the housing bust and the Great Recession, national house prices didn’t start to rebound until
2012, with home sales finally moving upward in the second half of 2011. By the end of 2010, the LIHHM
performance rankings in about two-thirds of the regional markets had turned positive or neutral, while the
national index rose a bit above 100 at the start of 2011
2011, indicating a somewhat healthier housing market
and presaging the current modest housing recovery.
Data as of
2010 Q4
Performance Rankings:
+4
POSITIVE
0
-4
NEUTRAL
NEGATIVE
Nationwide Economics
Page 5
HoHM Report 2015 Q1
While almost all local housing markets are healthy, about 25 percent worsened over the past
year. Still, slightly more improved than worsened.
The best measure of the near-term health of housing markets is the current LIHHM, but looking at
movements in the LIHHM over the course of a year can give useful information as well.
About 28 percent of regional housing markets improved over the past year (the smallest share since
2009), while approximately 25 percent worsened (the remainder were unchanged).
There are some modest regional patterns in these changes, with pockets of LIHHM increases centered
in the Midwest and the Northeast.
LIHHM decreases are more prevalent in the South Atlantic and Gulf Coast areas.
•
•
•
•
Current
LIHHM
4Q change †
≥ +3
INCREASED
UNCHANGED
≤ -3
DECREASED
Largest Increase
†
Largest Decrease
Rank
Metropolitan Statistical Area
Rank
Metropolitan Statistical Area
1
Elmira NY
373
Bismarck ND
2
Ithaca NY
372
Bellingham WA
3
Erie PA
371
Roanoke VA
4
Decatur IL
370
Bloomington IN
5
Johnstown PA
369
Atlantic City-Hammonton NJ
6
Danville IL
368
Rapid City SD
7
Bowling Green KY
367
Wheeling WV
8
Flint MI
366
Gainesville FL
9
Clarksville TN
365
Waterloo-Cedar
Waterloo
Cedar Falls IA
10
Anniston-Oxford AL
364
Ocean City NJ
Change in performance ranking; Data as of 2014 Q4
Nationwide Economics
Page 6
HoHM Report 2015 Q1
Appendix
Leading Index of Healthy Housing Markets (LIHHM)
Nationwide’s LIHHM is a data-driven view of the near-term performance of housing
markets based upon current health indicators for the national housing market and
373 metropolitan statistical areas (MSAs*) and divisions across the country. For
each MSA, the LIHHM uses local-level data to incorporate the idiosyncratic
characteristics of regional housing markets. The focus of the LIHHM is on the entire
housing market, rather than merely a projection of house prices or home sales.
Nationwide Economics LIHHM methodology
The LIHHM is calculated using a number of variables that describe many of the
drivers of the housing market for each MSA. In order to provide the best indicator of
housing
g health,, the included variables and corresponding
p
g weights
g
for each provide
p
the optimal leading perspective on future housing markets for each MSA. The drivers
can be grouped into the following categories:
1.
2.
3.
4.
Employment
Demographics
Mortgage Market
House Prices
As an illustration, if job growth increases in an MSA, then the resulting rise in incomes
creates additional housing demand. Consumers have a greater ability to earn and
save for home purchases, increasing sales and pushing up house prices. The LIHHM
measures the movements in the included employment, demographic, mortgage
market, and house price variables versus the long-term trends within each MSA.
These drivers are used to derive an overall LIHHM score on a scale from 75 to 125
centered around a neutral value of 100. These values are placed into performance
rankings to allow for better comparisons across MSAs. These performance rankings
are the key metric in comparing the MSAs both to each other and across time. Raw
LIHHM values are used for calculation purposes only and will only be shown on the
national level as the national score is standalone and is not compared to other areas.
* MSA: Geographical region with high population density and close economic ties throughout the nearby area,
capturing 85-90% of the U.S. population
Nationwide Economics
Page 7
HoHM Report 2015 Q1
Authored by Nationwide Economics
DAVID BERSON, PhD
Senior Vice President, Chief Economist
David holds a doctorate in Economics and a master’s degree in Public Policy
from the University of Michigan. Prior to Nationwide, David served as Chief
Economist,
i S
Strategist
i and
d Head
d off Risk
i k Analytics
l i for
f The
h PMI Group,
G
Inc., and
d
Vice President and Chief Economist for Fannie Mae. David has also served as
Chief Financial Economist at Wharton Econometrics and visiting scholar at the
Federal Reserve Bank of Kansas City. His government experience has included
roles with the President’s Council of Economic Advisors, U.S. Treasury
Department and the Office of Special Trade Representative. He is a past
President of the National Association for Business Economics.
BRYAN JORDAN, CFA
Deputy Chief Economist
Bryan is a frequent author and knowledgeable source on economic topics, and
has been featured in The Wall Street Journal and New York Times. Bryan holds
degrees in Economics and Political Science from Miami University and has
earned the Chartered Financial Analyst designation. He currently serves as
Chairman of the Ohio Council on Economic Education and is a member of the
Ohi G
Ohio
Governor’s
’ C
Council
il off E
Economic
i Ad
Advisors,
i
th
the N
National
ti
lA
Association
i ti
for
f
Business Economics, and the Bloomberg monthly economic forecasting panel.
BEN AYERS, MS
Staff Economist
Ben authors periodic economic analyses from the Nationwide Economics team,
as well as commentary
y on key
y economic topics.
p
Ben is also responsible
p
for
understanding and analyzing the enterprise business drivers to assist the
strategic planning process. He holds a Master of Science in Economics from the
Ohio State University, specializing in applied economic analysis, and a BSBA
from the Fisher College of Business at the Ohio State University, with a focus
on economics and international business.
Additional contributors: Chrissy Charters, Michael Groom, Ankit Gupta, Steve Hall, Francine Murzynski, and Matt Workman
This material is provided by Nationwide Economics and is general in nature. It is not intended as investment or economic advice, or a
recommendation to buy or sell any security or adopt any investment strategy. Additionally, it does not take into account the specific
investment objectives, tax and financial condition or particular needs of any specific person. We encourage you to seek the advice of an
investment professional who can tailor a financial plan to meet your specific needs.
The economic and market forecasts in this report reflect our opinion as of the date of this presentation/review and are subject to change
without notice. These forecasts show a broad range of possible outcomes. Because they are subject to high levels of uncertainty, they
may not reflect actual performance. Case studies and examples are for illustrative purposes only. We obtained certain information from
sources deemed reliable, but we do not guarantee its accuracy, completeness or fairness.
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Nationwide Economics
Page 8