April 20, 2018

New Freddie Index Gauges 'Normal' Markets

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New Freddie Index Gauges 'Normal' Markets

The nation’s housing market is improving, based on a three-month trend, and is inching closer to a stable range — but it still has a ways to go, according to an inaugural index by Freddie Mac.

Freddie Mac is debuting a new tool called the Multi-Indicator Market Index (MiMi), which measures the stability of the nation’s housing markets. The index uses information on local markets to calculate the range of equilibrium for single-family markets and provide indicators of where each market stands relative to its stable range and where each market is trending. The index draws from four indicators, using the long-term stable ranges for home purchase applications, payment-to-income ratios (which measures changes in home purchasing power), portion of on-time mortgage payments, and the state of local employment.

“Given the pickup in sales, new construction, and home values over the past couple of years, it’s fair to ask if we’re there yet: Is the U.S. housing market back to a normal range of activity with a good balance between demand and supply forces?” says Freddie Mac Chief Economist Frank E. Nothaft. “MiMi helps to pinpoint each market's 'sweet spot' by focusing on local housing differences while also tracking the fundamentals necessary for a stable market.”

According to the index, which reflects January data, 25 of 50 states, plus the District of Columbia, are improving based on a three-month trend.

The top five most stable states are:

  • North Dakota
  • District of Columbia
  • Wyoming
  • Alaska
  • Louisiana

The following four metros are stable, according to the index:

  • San Antonio
  • Houston
  • Austin
  • New Orleans

The top five most-improved states in the past year are:

  • Florida
  • Nevada
  • California
  • Texas
  • District of Columbia

Source: “For Housing, a Definition of ‘Normal,’ and a New Index to Track It,” Mortgage News Daily (March 26, 2014)

Read more:

Smaller Housing Markets Nearing 'Normal' Faster
'Perfect Storm' Dampens Housing Affordability
Loan Applications for Home Purchases Show Rebound