Slow, Steady Improvements in Market Stability

Thursday, August 27, 2015

Rome wasn’t built in a day.

Yesterday, Freddie Mac (OTCQB: FMCC) released the latest update to its Multi-Indicator Market Index (MiMi®), a catalogue that compiles data on the housing markets in every state -including detailed data from the top-100 metro areas- to assess the stability of the U.S. housing market. This in turn provides realtors, lenders, market analysts, and prospective buyers a clearer look at how things may change in both the distant and immediate future, helping them make informed decisions and give sound advice.

This update puts the national MiMi® value at 80.3, up 1.33% percent from last month and 5.41% from this time last year. A MiMi® value between 80 and 120 is considered “in-range”, or stable. The slow but steady national increase is promising, especially given that we’re still less than five years removed from the all-time low of October, 2010. Len Kiefer, Deputy Chief Economist at Freddie Mac, provides a little more reassurance, saying, “[Housing] markets are the strongest they’ve been in years with the national MiMi® above 80 for the first time since 2008…Homebuyer demand has helped put total home sales in pace for the best year since 2007, look for that trend to continue.”

The most dramatic increases have occurred across the Western states, though New Hampshire (83.4) and Massachusetts (82.9) have seen recent increases as well. Both currently sit above the national figure. Kiefer credits much of this recent increase to continued job growth across the country, though in the Northeast, the clearest indicators appear to be the rise in Payment-to-Income ratios. These ratios calculate the purchasing power of prospective buyers by accounting for mortgage rates, prices of homes, and changes in average household income. The higher the ratio, the friendlier the market is for the buyer. NH’s ratio of 66.7 still sits well below the nation average (71.3), but a 5.37% increase in this ratio from three months ago shows significant improvement.

In layman’s terms, the housing market, specifically in NH and MA, is becoming more stable and buyer-friendly. These states, and the national market as whole, are still quite a ways away from the all-time highs across the board of 2007 –when the national MiMi® peaked at 121.7- but the progress is nothing to sneeze at. Rising employment rates and improving proportions of current mortgage payments actually being made imply that the market will continue to stabilize. The worst is, by all accounts, long behind us. Buyers, lenders, and realtors can look forward to continued improvement and stability moving forward.

Enjoy the last few weeks of agreeable weather. As always, contact us with any questions you may have.