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While Some Indicators Are Softening, The Outlook for U.S. Housing Market Remains Positive

March 21, 2017

Declining affordability, slower household formations put Nationwide’s national housing index at lowest point in three years

Columbus, OH -

Nationwide’s latest forward-looking barometer of U.S. housing market health slipped to its lowest level since 2013. Unsustainably strong house price gains are weighing on affordability, and household formations are slowing, causing the index to dip this quarter. Despite the lower reading, however, the outlook for housing market growth remains optimistic due to solid job and income gains that are supporting demand for housing. 

“Household formations slipping below the long-term demographic trend is surprising considering that the previous quarter’s numbers were more upbeat, but solid job growth and income gains are still providing an overall positive outlook for the U.S. housing market,” said David Berson, Nationwide senior vice president and chief economist. “The one factor that we continue to keep our eye on is house price appreciation. The current pace is well above the long-term average, eroding affordability for groups such as first-time homebuyers and those whose income gains are not keeping up with the national trend.” 

According to Nationwide’s Health of Housing Markets Report (HoHM Report), common characteristics among the markets with the most unsustainable house price gains include strong housing demand, limited supply, and falling affordability. The quarterly report evaluates the housing health for the U.S. and 400 metropolitan statistical areas (MSAs). 

The report, measuring data as of 2016 Q4, also found that: 

  • Regionally, the rankings show positive and healthy housing trends in most MSAs, suggesting sustainable expansion in many areas over the next year. 
  • Despite the overall positive regional rankings, nearly all MSA ratings are unchanged or down over the past year. While the outlook in energy-intensive areas, such as the Dakotas, Texas and Louisiana, is still weaker, a few more MSAs elsewhere in the country have slipped into neutral or negative rankings. 
  • House price appreciation in some hot housing markets has been well above the long-term average for these areas for several years – generating concerns about housing affordability and reducing the outlook for sustainable growth.

Three of the 10 top metro areas are in North Carolina, and three are in Maryland. The 10 top metro areas in the index are, in order: California-Lexington Park, Md.; New Bern, N.C.; Clarksville, Tenn.-Ky.; Springfield, Mass.; Winston-Salem, N.C.; Pittsfield, Mass.; Baltimore-Columbia-Towson, Md.; Cumberland, Md.-W.V.; Fayetteville, N.C.; and Canton-Massillon, Ohio.

Bismarck, N.D., heads the list of bottom 10 metro areas for the fourth consecutive quarter, and four of the bottom group are in Texas. In order, the bottom 10 are: Bismarck, N.D.; Lafayette, La.; Victoria, Texas; Houma-Thibodaux, La.; Longview, Texas; Casper, Wyo.; Texarkana, Texas-Ark.; Anchorage, Alaska; Cape Girardeau, Mo.-Ill.; and Sherman-Denison, Texas. 

Showing the most improvement in the past year, in order, are: Watertown-Fort Drum, N.Y.; McAllen-Edinburg-Mission, Texas; Davenport-Moline-Rock Island, Iowa; Peoria, Ill.; Laredo, Texas; Jacksonville, N.C.; Bloomington, Ill.; El Centro, Calif.; Las Cruces, N.M.; and Tyler, Texas.

Weakening the most in the past year are, in order: Texarkana, Texas-Ark.; Cape Girardeau, Mo.-Ill.; Niles-Benton Harbor, Mich.; Bismarck, N.D.; Pocatello, Idaho; Athens-Clarke County, Ga.; Baton Rouge, La.; Knoxville, Tenn.; Victoria, Texas; and Cleveland-Elyria, Ohio.

More information about the HoHM Report, including the methodology used, can be found at www.inthenation.com/housing. The HoHM Report is released on a quarterly basis online and in print.

About Nationwide 

Nationwide, a Fortune 100 company based in Columbus, Ohio, is one of the largest and strongest diversified insurance and financial services organizations in the U.S. and is rated A+ by both A.M. Best and Standard & Poor’s. The company provides a full range of insurance and financial services, including auto, commercial, homeowners, farm and life insurance; public and private sector retirement plans, annuities and mutual funds; banking and mortgages; excess & surplus, specialty and surety; pet, motorcycle and boat insurance. For more information, visit www.nationwide.com.


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