Freddie Mac: Housing Market Recovery Basically ‘Flat’ In May

Posted by Patrick Barnard on July 25, 2014 No Comments
Categories : Residential Mortgage

Although more U.S. housing markets moved into the ‘stable range’ of housing activity in May, most remained ‘stalled’ largely due to a significant decline in the number of mortgage purchase applications, according to Freddie Mac's new Multi-Indicator Market Index (MiMi).

The index, which was introduced in May, measures the overall strength of the housing market based on four indicators: purchase applications, payment-to-income ratios, percent of borrowers current on their mortgage and employment.

Metro areas that moved back into the ‘stable range’ of housing activity in May included Salt Lake City, Los Angeles, Nashville and Pittsburgh, according to the report.

States that moved back into the stable range included Idaho and Utah.

Despite the ongoing housing recovery in these areas, the national MiMi value as of May stood at -2.64 points, indicating a weak housing market overall with only a slight decline of -0.05 points from April to May and a three-month trend change of +0.06 points, which is considered flat.

However, on a year-over-year basis, the U.S. housing market has improved by +0.86 points. The nation's all-time MiMi low of -4.42 was in November 2010 when the housing market was at its weakest.

Thirteen of the 50 states plus the District of Columbia were, as of May, in their stable range with North Dakota, the District of Columbia, Wyoming, Alaska and Montana ranking in the top five.

Eight of the 50 metro areas were in their stable range with San Antonio, Austin, Salt Lake City, New Orleans and Houston ranking in the top five.

States that saw the biggest month over month improvement in May included Illinois (+0.05 points), Massachusetts (+0.04 points) and New Mexico (+0.01 points). Arkansas, Colorado, Montana and Ohio were basically flat (-0.02.)

States that the saw the biggest improvement on a year over year basis included Florida (+1.68 points), Nevada (+1.60 points), California (+1.15 points), South Carolina (+1.14 points) and Idaho (+1.11 points) – all unchanged from the previous MiMi report.

Metro areas that saw the biggest month-over-month improvement included Chicago (+0.04 points); Riverside, Calif. (+0.02 points); and Providence, R.I. (+0.01 points) with Boston; Miami; Orlando, Fla.; and Salt Lake City metro areas all tied and unchanged (0.00.)

Metro areas that saw the biggest year over year improvement included Miami (+2.13 points); Orlando (+1.80 points); Las Vegas (+1.58 points); Riverside, Calif. (+1.53 points); and Austin, Texas (+1.48 points).

‘We saw an additional handful of metro areas move back into their stable range in May despite most markets still trying to get beyond stall speed,’ says Frank Nothaft, chief ecnomist for Freddie Mac, in a statement. ‘When we look at the other MiMi indicators outside of mortgage purchase applications, the news remains positive – unemployment rates are coming down, more borrowers are paying their mortgages on time, and mortgage rates remain low.

‘Moreover, while house price growth is moderating, many markets can still sustain additional house price gains while still maintaining strong homebuyer affordability,’ Nothaft adds. ‘So we remain cautiously optimistic the housing recovery will continue, albeit slowly, until we see more tightening in the labor markets to give personal incomes a much needed jolt.’

Len Kiefer, Deputy Chief Economist for Freddie Mac, says it is ‘no surprise markets aren't improving at the same pace as last year.’

‘Nevertheless, it's encouraging to see more markets healing,’ he adds. ‘The standout this month is the Salt Lake City metro area with three of its four MiMi indicators are back in their stable range of activity. In fact, on a yearly basis, the metro area finds its purchase applications are up on a year-over-year basis. The positive trend in home purchase applications reflects a strong local labor market, with employment growth in the Salt Lake City metro area about double the national average.’

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