Report Shows Healthy US Housing Market

COLUMBUS—The US housing market is generally quite healthy and has little chance of a downturn in the near future, according to a study just published by Nationwide, an insurance and financial services organization. Each quarter the Columbus-based firm evaluates the housing market for the entire US and about 400 separate metro areas.

However, its researchers do not just chart the rise of housing prices and the increase in the number of sales. Instead, they want to show which markets will likely enjoy overall health and which are in danger of either weakening or overheating.

“Sometimes strong housing prices are good, but other times this can go too far and impact affordability,” Ben Ayers, senior economist with Nationwide, tells GlobeSt.com. “We call this the Goldilocks index because we're measuring whether it's too hot or too cold and the likelihood of sustainable growth for the entire housing market.”

Each metro area is judged on how well its growth is in tune with its own long-term average. This can put some surprising areas at the top of Nationwide's lists since it means Detroit is evaluated differently from San Francisco.

In fact, the researchers found that the most sustainable major housing markets in the nation are the metro areas of Buffalo, Louisville, Oklahoma City and Detroit. And the collapse in oil prices has severely weakened some markets heavily dependent on the energy sector. Most of the metro areas in the bottom ten of Nationwide's index are in Wyoming, portions of Texas outside the its largest cities, and Louisiana. “We're seeing some pullback in employment and housing demand in these areas,” says Ayers.

At the other end of the spectrum, a few areas, mostly on the Pacific Coast, or in Colorado, Texas and parts of the Eastern Seaboard, have experienced rapid and unhealthy price increases.

Still, about 40% of the metro areas in the US have very healthy housing markets and only five have a negative reading. About 11% were tagged as neutral, meaning they had only a modest risk of a downturn in the near future.

Furthermore, none of the top 40 metro areas by population received a negative ranking and just four were judged neutral. The Chicago area, for example, was considered generally sustainable, with modest price gains that were not outstripping its long-term average. “It's definitely in the top half or the top third of the MSAs that we looked at,” says Ayers. “Chicago has relatively good job growth and has also seen a little bit of a pickup in household growth.”   

“Overall, everything is very positive,” he adds. “There are some pockets of concern,” such as San Francisco, where prices continue to jump about 13% per year. But even there the level of concern remains minor, since the increases are not out of line with the area's long-term trend. “In terms of sustainability this is the best housing market we've seen in 15 years.”