As our Homeowners’ Market Fundamentals Index gains a bit of traction, we’ve been besieged with questions about the ranking tool. 

One of the key questions that have come in this week has been some variant of this – “what are the most important factors in our minds that contribute to the overall health and vitality of a housing market (from the perspective of a homeowner)”.

That is indeed somewhat of a loaded question, in that there are a number of factors that contribute to the overall health and vitality of a housing market from the perspective of a homeowner.  It’s in fact the core of our argument that no single factor – particularly single family unit price – predicts or reflects the health of a local housing market, hence the need to take a look at a variety of metrics or data points.  Over the next several days we’ll post commentary about the factors or data points that seem to have the highest level of correlation. 

Two of the key factors, and by no means the only two, are job growth and unemployment.  Our team tracks total nonfarm job growth and unemployment using data reported by the BLS; as noted in prior posts we’ve chosen to use a 6-month rolling average of the monthly data to smooth out the anomalous reporting later revised by the BLS team, and for purposes of trending. 

Looking at total nonfarm job growth and our HMFI rankings, as you’d expect there is a very strong correlation with overall housing market health and higher job growth rates.  Of the top five cities in our HMFI rankings for November, the average of their averaged total nonfarm job growth rates was 2.52%, the average growth rate for the top ten cities was 2.64%, and the average growth rate for the top twenty cities was 2.28%.  Compare that with the database average for this value – 1.0%. 

Looking at unemployment and our HMFI rankings, as you’d expect there is also a very strong correlation with overall housing market health and higher unemployment rates.  Of the top five cities in our HMFI rankings for November, the average of their averaged unemployment rates was 4.23%, the average unemployment rate for the top ten cities was 4.32%, and the average unemployment rate for the top twenty cities was 4.3%.  Compare that with our database average for this value (remember, all our values represent a 6-month rolling average) – 4.9%, and the national value for unemployment reported last month (U3) – 6.1%.  Tomorrow’s numbers are projected to be significantly worse – we’re putting money on 6.5% for the U3 value.

Over the next several days we’ll look at other factors and data points that correlate most strongly with healthy housing markets for homeowners. 

Technorati Tags: