Although home prices are skyrocketing amid housing inventory that is hitting all-time lows, the overall housing market continues to make gains as housing activity picked up in the second quarter.
Nearly 300 markets across the U.S. posted an increase in economic and housing activity from the first to the second quarter, according to the National Association of Home Builders and First American Title Insurance Leading Markets Index.
“This report shows that the housing and economic recovery is widespread across the nation and that housing has made significant gains since the Great Recession,” NAHB Chairman Granger MacDonald said. “However, the lagging single-family permit indicator shows that housing still has a ways to go to get back to full strength.”
The LMI measures current home prices, permit and employment data to plot the economic health of an individual market. The index tracks 337 markets nationwide.
The index shows the market is currently running at an average 102% of normal housing and economic activity in the second quarter.
But while the overall housing market is operating at more than 100%, individual components of the index are at different stages of recovery. Employment currently stands at 98% of normal activity and home price levels are significantly above normal at 152%.
However, single-family permits are running far below historical levels at just 54% of normal activity.
“The overall index is running above 100% of normal largely due to healthy home price appreciation,” NAHB Chief Economist Robert Dietz said. “At the same time, the reason why single-family permits are barely halfway above normal is because builders continue to face persistent supply-side headwinds, including rising material prices and a shortage of buildable lots and skilled labor.”
But despite the challenges, the housing market continues to improve. In fact, in 196 of the index’s metro levels, economic and housing activity hit or surpassed their last normal levels in the second quarter. This is up 68 markets from last year.
“With 89% of all metro areas posting a quarterly increase in their LMI score, this is a strong signal that the overall housing market continues to make broad-based gains,” First American Vice Chairman Kurt Pfotenhauer said.
