Majority of Housing Markets Have Recovered to Historical Norms

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When Freddie Mac introduced its
Multi-Indicator Market Index (MiMi) in March 2014 only 11 of the 50 states plus
the District of Columbia were deemed stable and in range of their historic
benchmarks.  That was also the case for
only four of the 50 leading metropolitan areas. 
Further, the index itself stood at -3.08 points, indicating a week
housing market overall and not much improved from the all-time low of -4.49 in late
2010 when the housing market was at its weakest.

This week Freddie Mac released the most
recent MiMi, covering October 2016.  The
index stood at 86.4, indicating a housing market “that’s on the outer edge of
its historic benchmark range of housing activity.”  This is a 0.42 percent improvement from
September and a year-over-year gain of 5.88 percent. The index has recovered by
46 percent from that 2010 low.

 Further,
the report finds 80 percent, or 41 states plus the District of Columbia, have
MiMi values within range of their benchmark averages; Another state, Georgia,
is nudging at its outer range.  The
number of metro areas that have also entered the historic range has increased
to 77 of the 100 that are now tracked.  

The MiMi is calculated from
information gathered from home purchase applications that provide information
on payment-to-income ratios, from performance data on on-time mortgage
payments, and from information about local employment.  This is combined with current local market
data to assess where each single-family housing market is relative to its own
long-term stable range. MiMi also indicates how each market is trending,
whether it is moving closer to, or further away from, its stable range. A
market can fall outside its stable range by being too weak to generate enough
demand for a well-balanced housing market or by overheating to an unsustainable
level of activity.

The five states with score closest to
their historical benchmark index of 100 are all in the West; Colorado (98.6), Utah (101.5), Hawaii (98), Idaho (97.2) and
Oregon at (96.8).  The leading
metropolitan areas are Dallas (100.2), Nashville (100.5), Honolulu (100.8),
Ogden, Utah (100.8), and Los Angeles (99.1).  ranking in the top five with scores closest to
their historical benchmark index levels of 100.

In October, 43 of the 50 states and
82 of the top 100 metros were showing an improving three-month trend. The same
time last year, 30 states and 69 of the top 100 metro areas were showing an
improving three-month trend.

Freddie Mac Deputy Chief Economist
Len Kiefer commented, “The National MiMi stands at 86.4, a 5.88 percent
year-over-year increase, but still below its historic benchmark normalized to
100. The purchase applications indicator is up nearly 20 percent from last year
and is reflected in the recent better-than-expected existing and new home sales
purchase data. 

“MiMi does not yet capture the
recent jump in mortgage rates
since the election, which will drive down
homebuyer affordability and likely dampen demand for home sales next year in
some markets. While we see strong house price growth in markets like Dallas,
Houston, Orlando, Phoenix and others, most are still well below their pre-2008
peak and still have significant room for improvement.”

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