Tuesday, June 3, 2008

Which Markets have the Strongest Housing Fundamentals?

Although all markets are experiencing the effects of tighter mortgage underwriting, there are a number of markets which have very strong demand - supply fundamentals. The chart at left ranks the markets tracked by Residential Property Analytics. The numerical rating is the number of jobs created in the market over the last year divided by the number of residential permits issued. In other words, Denver added more than 2 jobs for each residential unit permitted, while Detroit lost more than 8 jobs for each unit permitted. In our experience, when the ratio falls below 1.0 markets start to soften. A full explanation of the data and how it is calculated can be found in the free sample market report which can be downloaded at our website. Obviously this ratio is not the only factor affecting markets - there are plenty of foreclosures attributable to the subprime mess which are acting as a drag on markets everywhere. Still, the markets with good underlying fundamentals should recover first, while the markets with poor employment growth are going to suffer longer.