Nine of America's healthiest homebuilding markets lie in just two states--Texas and North Carolina--and the Sunbelt accounts 16 of the 20 best markets nationwide, according to the Builder Healthy Markets Index released today.
The index, compiled by Hanley Wood Market Intelligence and reported by Builder magazine--both sister companies to ProSales--found the Raleigh-Cary, N.C., market topped the list, followed by Austin-Round Rock, Texas; Durham-Chapel Hill, N.C.; Huntsville, Ala.; and Gulfport-Biloxi, Miss.
The other Texas markets in the top 20 were Houston-Sugar Land-Baytown (7th), San Antonia (10th), Dallas-Fort Worth-Arlington (12th), and El Paso, 15th. Of the other North Carolina markets on the top 20, Charlotte-Gastonia-Concord came in 8th and Wilmington was 16th.
So dominant was the Sunbelt region in the survey that there were only two Midwestern cities on the list (Minneapolis-St. Paul-Bloomington, in 6th, and Omaha-Council Bluffs, Neb, and Iowa, in 19th), only one Western market (Boise-Nampa, Idaho, in 18th), and just one northeastern city (Boston, in 20th).
The index takes into account such traditional factors in housing demand as population trends and job growth. It also weighs home prices and the rate of building permits. To actual data from 2010 it adds projections for 2011 compiled by Moody's Economy.com, weighs the results and produces a score on a 100-point scale in which 50 or above indicates a truly healthy market.
"We we created the Builder Healthy Markets Index several years ago, there were few classically healthy markets to speak of," Boyce Thompson, editorial director of the Builder group of magazines and former editor of ProSales, wrote today in an introduction to the report posted on Builder's website. "With nearly every economic metric falling ... only one or two markets managed to score higher than 50. Today, thanks to an improving U.S. economy, which has finally started to lift employment and incomes, nearly half the top 100 MSAs on our list could be considered healthy. But even though incomes are rising and employment prospects have improved, there's still one metric weighing on home building activity--home prices are projected to decline this year in virtually every major housing market."
Added Hanley Wood's director of research Jonathan Smoke, who compiles the index: "I think much of what we are seeing with home prices is simply a shift in what has sold. All that's being measured now are lower-end home sales. As above-median homes begin selling again in larger numbers, home price declines will be history."
Here is the list of top 20 markets, along with their market health index score, the building permit forecast for 2011, the percent change from 2010 that the forecast represents, and additional comments from Thompson's report.
- Raleigh-Cary, N.C.
Market Health Indicator: 86.9
2011 Building Permit Forecast: 9,604 (90%)
Building permits increased 85% last year to 8,600, with much of the strength on the multifamily side. But single-family permits increased as well as builders took stock of improving market conditions. The market was hot enough that existing home prices rose 4% in 2010, though they are expected to fall 10% this year due to a spreading foreclosure problem.
- Austin-Round Rock, Texas
Market Health Indicator: 86.5
2011 Building Permit Forecast: 11,079 (57%)
Though Austin was knocked from the top spot on this year's list, its housing fundamentals continued to show solid improvement. The metro area enjoys some of the strongest job growth in the nation. Employment accelerated last year with the addition of 18,700 more jobs, most of them in service industries, lowering the unemployment rate to 7%. Google recently fanned the employment flames by announcing it wants to open a division there dedicated to location-based marketing and mobile recommendations.
- Durham-Chapel Hill, N.C.
Market Health Indicator: 81.5
2011 Building Permit Forecast: 3,250 (70%)
The median income in Durham will rise 4.36% this year, faster than in any of the other top 20 markets. Durham added another 4,100 jobs last year to reach 287,300, dropping its unemployment rate below 7.5%. With a repeat performance in 2011, it will climb above 2007 employment levels. Existing home prices rose 3% in 2010, to $178,000. Single-family permits rose 60% last year. But a sharp falloff in apartment permits kept the overall total in the minus category. Moody's is calling for a reversal this year, with total building permits rising by 70%.
- Huntsville, Ala.
Market Health Indicator: 80.3
2011 Building Permit Forecast: 4,283 (55%)
A strong military presence here contributes to an unemployment rate of roughly 7%, well below the national average. The 2005 Base Realignment and Closure Act caused a big population influx and kept income trends steady. The stimulus will be felt again this year, when the Army Materiel Command opens a new headquarters that's expected to add 1,354 jobs. All told, the region is expected to add another 3,460 jobs this year. Household growth is stronger than any other top 100 market in the country. Huntsville is a very affordable place to live, with a median home price of $123,000 in 2010, down only $7,000 from the peak. Median prices fell slightly last year after existing home sales fell 8.5%. But building permits rose for the first time in four years. They were up 10.7% over the previous year, with single-family accounting for a full 92% of the action.
- Gulfport-Biloxi, Miss.
Market Health Indicator: 78.1
2011 Building Permit Forecast: 1,783 (-4%)
Though fewer households live here now (92,300) than in 2004 because of Hurricane Katrina, Moody's anticipates strong growth, 3.24%, this year. That will be coupled with a large, 4.52% increase in median incomes, which have stagnated at roughly $38,300, well below the national average.Unemployment here is also below the national average. Gaming and tourism are the major industries, though nearly a quarter of the jobs here are in government. Keesler Air Force Base is a big employer. Housing in Biloxi is inexpensive, with a median price of $122,450 last year. Home prices, down from a peak of $154,400 in 2007, appear to have bottomed out. Moody's is calling for an increase next year. Permit levels, which got as high as 5,400 in 2007, are expected to remain in the vicinity of 1,800 this year, before rising strongly in 2012.
- Minneapolis-St. Paul-Bloomington, Minn.-Wis.
Market Health Indicator: 77.6
2011 Building Permit Forecast: 9,403 (66%)
The Little Apple appears poised for growth. Last year's strong rebound in permit activity--filings were up 22% in 2010, led by a surge in multifamily--is expected to accelerate in 2011. If builders actually pull 9,403 permits this year, as Moody's forecasts, that would equal half the volume of 2005. Foreclosure filings actually fell in Minneapolis last year, though banks still have inventory to work through. Median existing home prices, which stood at about $167,000 at the end of last year, have fallen only 27% from their peak in 2005. The market enjoys decent household growth (1.77% is forecast for 2011) for a Northern city, though most of it comes from natural growth.
- Houston-Sugar Land-Baytown, Texas
Market Health Indicator: 77.3
2011 Building Permit Forecast: 34,763 (30%)
Home prices have stabilized. Employment will grow by a robust 2.66% this year, and cut the unemployment rate by nearly half a percent. Median incomes will rise strongly, by 3.33%. And building permit activity will increase by nearly a third. The median income here, $56,500, is about $10,000 above per capita income for the state. Houston showed 35,800 foreclosure filings last year, according to RealtyTrac, one out of 62 households. That may lead to a small decrease in median existing home prices which crept up to $153,000 last year. Even so, that's about where they were in 2007, at the height of the market.
- Charlotte-Gastonia-Concord, N.C.-S.C.
Market Health Indicator: 76.6
2011 Building Permit Forecast: 9,494 (65%)
The Charlotte market may have hit bottom last year. Builders pulled only 5,750 permits (permit levels got as high as 25,000 in 2006). Moody's Economy.com is calling for major increases during the next two years, including a 65% rise in 2011. The median price of an existing home only rose as high as $204,000 at the peak of the market in 2007. As 2010 closed, it was still at about $190,000 and expected to stay in that general vicinity through 2012. Strong household formation, even during the economic recession, is the secret to Charlotte's success. Households are projected to rise another 2.4% this year.
- Naples-Marco Island, Fla.
Market Health Indicator: 75.8
2011 Building Permit Forecast: 2,504 (108%)
Naples is outperforming the rest of Florida, despite a median home price ($330,000 at the end of the year) that is among the highest in the Southeast. Existing home prices reached as high as $515,000 during the housing boom. The metro area, which is heavily dependent on tourism, also has a persistently high rate of unemployment--12.8%. Where is the strength coming from? Part of it stems from the sheer desirability of living in this resort town. The population is still growing; it rose 2.6% last year to 329,000. And tourism rebounded strongly late last year, according to the local tourist bureau.
- San Antonio, Texas
Market Health Indicator: 75.6
2011 Building Permit Forecast: 8,002 (23%)
The median price of an existing home--about $150,000 last year, and expected to remain at about the same level for the next two years--has barely budged as many markets elsewhere gyrated wildly. Strong employment growth (1.84% last year), coupled with inexpensive housing, is the secret to the city's success. Steady household growth (2.37%) is expected to continue this year, and median incomes are projected to rise another 2.33% to $50,000. Despite its size, San Antonio doesn't even make the list of the top 100 metro areas affected by the foreclosure crisis. Permits, which reached as high as 22,000 in 2005, stood at 6,500 last year and are expected to grow by nearly one-quarter this year.
- Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.Va.
Market Health Indicator: 74.8
2011 Building Permit Forecast: 20,397 (32%)
Non-farm employment rose 1.4% last year, with most jobs in the service sector. The unemployment rate (5.7% in December) is the lowest of any major metro area in the country. Household formations are expected to grow another 1.2% this year. Builders drew 26% more building permits last year than in 2009. Multifamily construction is poised for some big increases, particularly in low-rise apartments close to light-rail stops.
- Dallas-Fort Worth-Arlington, Texas
Market Health Indicator: 70.7
2011 Building Permit Forecast: 30,630 (52%)
The Metroplex still managed to add 50,800 jobs outside of farming last year, a 1.8% increase in employment. The median price of a home stood at $149,000 at year-end, just about where it was at the peak of the market. Builders remain bullish on the area's prospects--they pulled 19,500 single-family permits last year, a 33% increase. In an indication that construction is about to accelerate, several developers last year picked up large tracts of land, especially in high-growth areas of Fort Worth.
- Birmingham-Hoover, Ala.
Market Health Indicator: 70.1
2011 Building Permit Forecast: 1,657 (4%)
Birmingham enjoyed positive income, population, and job growth in 2010, all of which are expected to continue in 2011. Unfortunately, the payoff in renewed home building activity isn't expected until 2012, when Moody's Economy.com thinks permit activity will more than double. Housing sales slowed 28% in the fourth quarter of last year, according to data from the Alabama Center for Real Estate. This led to a decline in median home prices for the fourth consecutive year. Even so, median home prices, which finished at $140,000 last year, are off only 15% from their peak of $165,000 in 2006. They are expected to remain stable this year.
- Nashville-Davidson-Murfreesboro-Franklin, Tenn.
Market Health Indicator: 67.2
2011 Building Permit Forecast: 8,326 (53%)
Nashville has enjoyed a dramatic improvement in hiring since unemployment peaked there in June 2009. After three straight years of decline, incomes in Nashville finally turned positive last year, though they increased by only 1%. Moody's Economy.com expects income levels to rise at twice that rate this year. Existing home sales stumbled down the home stretch in 2010 and finished the year 4% behind the previous year. Improving economic metrics buoyed the spirits of builders, who increased the pace of building permit activity last year, after four years of declines. Total building permits in December were 35% above year-ago levels, with gains coming from both single-family and multifamily segments.
- El Paso, Texas
Market Health Indicator: 65.8
2011 Building Permit Forecast: 4,685 (1%)
El Paso has been a big beneficiary of the 2005 Base Realignment and Closure Act; more than 30,000 military personnel and their families have been relocated to Fort Bliss. Hanley Wood Market Intelligence forecasts the addition of 4,600 new jobs this year, followed by even bigger growth in 2012. El Paso, located near the border with Mexico, is quickly becoming a big city. The Census Department expects its population to top 1 million by the end of 2015. Existing home prices rose slightly last year, reaching $132,000 in the fourth quarter. Builders sense that big growth may be afoot; they took out 34% more building permits n the fourth quarter than they did a year earlier. Apartment Realty Advisors estimates that 8,000 new units will be needed to meet rising demand in 2012 created by the influx of military families.
- Wilmington, N.C.
Market Health Indicator: 65.0
2011 Building Permit Forecast: 2,578 (41%)
The town's stabilizing economy and inexpensive housing for a beach town (the median price of a home is only $171,000) make it look pretty good to outsiders. Wilmington continues to enjoy some of the strongest population growth in the country--2% annually for the last several years. Wilmington's unemployment rate is expected to recede slowly, due in part to the influx of new people looking for work. Median home prices, which peaked at $221,000 in 2006, had fallen only 27% to $171,000 through last year. They are expected to remain at about that level for the next two years. Building permit activity rose 22% last year, and it's expected to rise twice as fast this year.
- Richmond, Va.
Market Health Indicator: 64.2
2011 Building Permit Forecast: 4,539 (29%)
Building permit activity rebounded by 21% last year after four consecutive years of decline. The gain was led by an increase in multifamily activity, though nearly three quarters of residential construction here remains single-family. This occurred even as existing home sales fell 6.4%. Richmond has one of the lowest unemployment rates in the country, 7.3%, though job growth appears to have stalled in education and healthcare. Though permits have fallen dramatically since 2004, when they approached 10,000, the Richmond housing market has remained pretty stable. Home prices, which peaked at $233,000 in 2007, had fallen only 12% to $206,000 by last year, and they are expected to stay in the same vicinity for the next two years.
- Boise-Nampa, Idaho
Market Health Indicator: 63.0
2011 Building Permit Forecast: 3,358 (109%)
Employment is projected to rise by almost 2% and cut into an unemployment rate that stood at about 9.5% at year's end. A market that produced 11,500 building permits in 2005 managed only 1,600 last year. Moody's Economy.com is predicting 3,358 total permits this year.Median existing home prices fell 10.7% in the last year to $142,898 in January 2011. It finished No. 20 on RealtyTrac's list of the MSAs hit hardest by foreclosure last year--one out of every 21 households received a notice last year. As a result, in January there were nearly as many foreclosures (1,714) as there were homes for sale (2,051), according to Trulia.
- Omaha-Council Bluffs, Neb.-Iowa
Market Health Indicator: 62.8
2011 Building Permit Forecast: 3,008 (-4%)
Despite improved economic conditions in Omaha, the housing market is expected to continue at its usual slow-but-steady pace in 2011. Omaha home sales rose 2% during the year that ended January 2011. Thanks to decent demand and job growth, the median sales price of an existing home is up 1.9% in the last year, according to Trulia, reaching $160,000 in late February. Unfortunately, new construction appears to be lagging the overall market. The 2% increase in total home sales includes an 8% decrease in new home sales. And that number excludes condos, which were down even more--17%. Permit activity fell 14% last year, due in part to the conclusion of a big military project. Moody's predicts the decline will slow to 4% this year.
- Boston-Cambridge-Quincy, Mass.-N.H.
Market Health Indicator: 62.6
2011 Building Permit Forecast: 8,469 (32%)
The unemployment rate, 6.75%, is well below the national average, even as the metro area continues to add jobs. Plus, those jobs are well-paying. The median income here is $75,669. Housing is expensive, though prices are falling. The median price of a home, which got as high as $410,750 in 2005, fell to $344,540 last year, and economists at Moody's economy.com predict it will drop another 6% this year. Building permit activity rose 17% last year, thanks to a big jump in multifamily permitting late in the year, and Moody's predicts a gain of another third this year, with a huge increase forecasted for 2012 that would take the area back nearly to 2006 levels.