U.S. Job Growth, Wage Gains to Boost Household Formations After 2015 Slowdown
According to the latest housing market barometer released this week by Nationwide Insurance, despite a surprising slowdown in household growth at the end of 2015, the outlook for the U.S. housing market remains upbeat thanks to solid housing demand driven by continued job growth and incipient wage gains. Positive U.S. economic activity continues to support the housing market, which shows little chance of a downturn in the next year.
The forward-looking Health of Housing Markets Report
evaluated the housing health for the U.S. and 400 metropolitan statistical areas (MSAs). This quarter's performance rankings show housing markets in the vast majority of MSAs remain healthy. The latest report suggests that most local housing markets should see sustainable expansion over the next year, although there are increasing concerns in markets with strong ties to the energy sector.
"The cumulative boost from stronger job growth over the past two years, particularly for millennials, combined with the pent-up demand to form households resulted in a sizable jump in household formations starting late in 2014 and running through most of last year," said David Berson, Nationwide's senior vice president and chief economist. "The recent economic, jobs and wage data do not support the surprising decline in household formations we saw at the end of 2015, and because of continued economic expansion, we do not expect a housing downturn in the next year."
The Top 10 MSAs in the index are, in order: Dayton, Ohio; Yakima, Wash.; Cleveland-Elyria, Ohio; Saginaw, Mich.; Syracuse, N.Y.; Trenton, N.J.; Niles-Benton Harbor, Mich.; Memphis, Tenn.-Miss.-Ark.; Lansing-East Lansing, Mich.; Columbus, Ohio
The Bottom 10 MSAs, in order, are: Houma-Thibodaux, La.; Laredo, Texas; Lafayette, La.; Victoria, Texas; Austin-Round Rock, Texas; Asheville, N.C.; Hammond, La.; San Angelo, Texas; Odessa, Texas; Watertown-Fort Drum, N.Y.
Showing the most improvement in the past year, in order, are: Weirton-Steubenville, W.Va.-Ohio; Lima, Ohio; Lansing-East Lansing, Mich.; Glens Falls, N.Y.; Waterloo-Cedar Falls, Iowa; Dubuque, Iowa; Fairbanks, Alaska; Roanoke, Va.; Columbus, Ind.; Oshkosh-Neenah, Wis.
Weakening the most in the past year, in order, are: Victoria, Texas; San Angelo, Texas; Grand Junction, Colo.; Laredo, Texas; Williamsport, Pa.; Farmington, N.M.; Buffalo-Niagara Falls, N.Y.; Asheville, N.C.; Boulder, Colo.; Santa Fe, N.M.The report also indicates that:
- The most sustainable major housing markets in the nation include Milwaukee, Louisville, Cincinnati, Pittsburgh, New York, and Philadelphia.
- Low oil prices continue to weigh on job growth and therefore housing outlooks for MSAs in energy intensive areas -- especially in Texas and Louisiana, where several housing markets have slightly negative outlooks. Eight of the bottom 10 MSAs are from these two states.
- A slowdown in household formations in the fourth quarter of 2015 negatively affected the Leading Index of Healthy Housing Markets (LIHHM) scores of many MSAs, but given continued job growth and wage gains, household formations should pick up again soon, helping the LIHHM scores to rebound.