Mortgage Guaranty Insurance Corp. on Monday reported that its national Market Trends Index rose to 6.66 in the first quarter, up slightly from 6.58 in the two previous quarters.
“Overall, the national economy is improving,” said Neil Siegel, MGIC’s senior market analyst. “The unexpected job gains in March propelled the U.S. economy forward. This was the largest gain in a single month since April 2000.”
Siegel noted that increased spending from consumers, businesses and government all contributed to the national economic expansion. “However, it should be noted that a number of risks remain,” said Siegel. “Rising business costs, budget deficits, higher energy prices and the offshoring of jobs all create unknown economic risk.”
MGIC’s MTI is based on the Market Trend Analysis Report produced quarterly by MGIC’s Credit Policy Department using lagging three-month market data from 73 Metropolitan Statistical Areas (MSAs). The index is a barometer of single- family real estate market conditions with readings ranging from 1 to 10. A reading of 1 indicates a weak market showing no signs of improvement; a reading of 10, a strong market with no signs of deterioration. A reading of 6 to 8 indicates a stable market.
Siegel notes that 10 of the 73 markets tracked by MGIC are currently experiencing “soft” or “weak” single-family housing market conditions.
“Even though interest rates have inched higher recently, the housing market continued to expand,” said Siegel. “In fact, some economists have boosted their forecast for total housing sales in 2004. Home-price appreciation is still expected to slow compared to previous years, which should offset the concerns in some markets where home prices have risen faster than household incomes. Still, the supply of homes nationally remains at an acceptable level.”
In the first quarter, three of the 73 markets had the “current conditions” component of their rating changed. Honolulu and West Palm Beach (Fla.) were upgraded from stable to strong, while Portland’s rating was changed to soft.
Of the 55 markets currently rated as “stable” in MGIC’s Market Trend Analysis, 20 have a short-term projection of “softening” and three have a short-term projection of “improving.”
Austin, Texas; Buffalo, N.Y.; Detroit; Indianapolis; Rochester, N.Y.; Portland, Ore.; San Francisco; Salt Lake City; and Tulsa, Okla., are currently “soft,” and San Jose, Calif., is currently rated “weak.” On the other end of the spectrum, Orange County, Calif.; Riverside-San Bernardino, Calif.; San Diego; Orlando, Fla.; Tampa, Fla.; West Palm Beach, Fla.; Honolulu; and Washington, D.C., are currently “strong,” according to MGIC’s Market Trend Analysis.
“With the exception of the Midwest, all of the other regions have posted gains compared to the previous quarter,” notes Siegel. “Some of the strongest gains recently have been in southern California and the Southwest, as evidenced by the year-over-year change.
Along with the West, the South is leading the national recovery with some of the strongest gains occurring in Florida.”
MGIC is a provider of private mortgage insurance coverage.
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