Yesterday we began a series of posts with the intent of discussing in more detail what factors our research shows have the greatest impact on the vitality of a given market’s single family home market - from the perspective of a homeowner.  Here’s a quote from our post yesterday –

In our research we’ve conducted over the past five years for residential real estate investors (multifamily and single family) we’ve mined our database to determine which factors have the strongest and most specific correlations with healthy markets.  We’ve gone back and sifted the data to assess markets from the perspective of homeowners’ as well – leading in part to the creation of the Homeowners Market Fundamentals Index system.

There are a number of factors that correlate strongly with strong housing markets for homeowners; over the next several days we’ll look at some of these more interesting factors.

We’ll look at three different factors today.  First let’s take a gander at housing affordability using the Housing Affordability Index.  Recent and proposed mortgage rate changes will no doubt change these numbers in many markets very soon, but here’s what our database revealed yesterday.  Of the top ten markets in December’s HMFI rankings, their average HAI value was 126.9, compared to 114.5 for the entire database.  The highest was 160.3 in Killeen, Texas; the lowest 89.4.  The point - healthy housing markets are more affordable relative to median income measures. 

Secondly let’s take a look at the PMI Group’s Market Risk Index values for the top ten markets in the December HMFI rankings.  The average PMI Market Risk Index value for the top ten markets is 1.3; compare that to the market average for our database of 15.9.  Nine of the top ten markets had a Market Risk Index value of 1; only one did not and it was Grand Junction with a value of 3.7.  The point – healthy housing markets have minimal risk (per the PMI Group’s assessment) of further declines in price. 

Finally let’s take a look at the median price of homes in the top ten markets ranked in the December HMFI rankings.  [Yes, we understand median price data is fraught with potential problems and weaknesses, and will in fact address the myriad issues with median home price data in a soon to be upcoming edition of The Emerging Market Report.]  The average median price of the top ten markets this month was $162,307.  The lowest median price was in Fort Worth ($117,600); the highest Grand Junction ($218,500).  Eight of the top ten market median prices were below $200,000.  The point – healthy housing markets have more affordable housing, with lower median price levels. 

Tomorrow we’ll finish up with a look at population growth and our population growth ratio data for the top markets in our Homeowners’ Market Fundamentals Index.

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