Markets in 146 of the approximately 340 metro areas nationwide returned to or exceeded their last normal levels of a combination of economic and housing activity in the second quarter of 2016, according to the National Association of Home Builders' Leading Markets Index (LMI). This represents a year-over-year net gain of 66 markets.
Greater Greenville Reaches Normal
The Greater Greenville area reached normal levels of economic and construction activity for the first time since March 2008. Greater Greenville fell as low as 77 percent of normal in 2011, and has been slowly improving since then. Greenville now stands at 101 percent.
During the second quarter of 2016, permits in Greater Greenville rose to 74 percent of normal. Housing prices continued to rise and now stands at 133 percent of normal. Jobs are at 97 percent of normal.
"The data bears out the condition in our area that a lack of inventory, created by a lack of production for a sustained period of time, is creating a housing affordability problem," Michael Dey Chief Executive Officer of the Home Builders Association of Greenville, said.
Spartanburg is Normal and Accelerating
Spartanburg reached normal a month before Greenville, and its growth continues to accelerate. At the end of the second quarter, Spartanburg was at 111 percent of normal, but permits have risen to 121 percent. Housing prices in Spartanburg are at a more healthy 116 percent.
"The difference between Greenville and Spartanburg is emblematic of the anti-growth problem in Greenville County," Dey said. "Housing prices prove demand exists, and resistance to development in Greenville County is pushing development to Spartanburg County," he said. "That type of growth pattern is exactly how Sprawl in Atlanta happened."
The Rest of South Carolina
Charleston (117 percent) and Myrtle Beach (110 percent) also have returned to normal. Columbia is nearing normal at 98 percent.
The National Picture
Nationally, all three components of the LMI contributed to the quarter-over-quarter growth in the nationwide score. Permits rose from .46 to .47, prices increased from 1.35 to 1.37, and employment rose from .96 to .97. Over the year, the permits, prices, and employment components expanded by .04, .07, and .02 respectively. Regionally, 79 of the 364 markets, 21 percent, have an LMI Score that is greater than or equal to 1.0 and are considered normal, up from 74 in the second quarter of 2015 and 62 last year.
While most markets do not have an overall LMI score that is greater than or equal to 1.0, a recovery in one or more components has taken place across a number of MSAs. For example, in 26 markets single-family permits have returned to normal. This is unchanged from the second quarter, but 5 more than last year’s total. The number of markets where house prices are considered normal was also unchanged over the quarter at 345, but it is 6 greater than the 339 markets from one year ago. Meanwhile, the number of MSAs where employment has reached or exceeded normal reached 72, up from 64 markets in the second quarter and from 40 markets one year ago.
Of the 364 MSAs included in the LMI, 56 percent saw their score increase over the quarter and 69 percent recorded year-over-year growth. According to the map above, the MSAs with the largest year-over-year increase, those markets where the annual increase in its LMI Score exceeded that of the nation as a whole, were largely located in the West and in the South, and many reside in the former “bubble” states of California, Nevada, Arizona, and Florida. As illustrated by the first map, many of the markets in these states now have an LMI score closer to the middle of the Score distribution, and off the bottom, indicating that the effects of the crisis in these MSAs are disappearing and the recovery in these markets is taking hold.
To read more about the LMI, visit
NAHB.org/LMI.
