NAHB recently unveiled an index that tracks housing markets on the mend: the NAHB/First American Improving Markets Index (IMI). The IMI is intended to draw attention to the fact that housing markets are local and that there are metropolitan areas where economic recovery is underway. The index measures three readily available monthly data series that are independently collected and are indicative of improving economic health. The three indicators are employment, house price and single family housing permit growth.
The first release of the IMI contained 12 metropolitan areas that are improving under a conservative examination of local economic and housing market conditions. Among these areas is the Pittsburgh metropolitan statistical area (MSA).
The housing market in Pittsburgh is improving with several factors at work. According to Greg Clark of 84-Lumber, “it’s jobs, jobs, jobs and low unemployment” that are propelling the local economy. Moreover, the jobs that are being created tend to be higher paying. Major employers like Westinghouse Electric, PNC Bank, the University of Pittsburg Medical Center, and even Google are hiring in the Pittsburgh area. Job growth among such employers is a far cry from how Pittsburgh looked just a generation ago when its labor market was dominated by the steel industry.
The economic benefits of the Marcellus Shale is also a factor, which according to local home builder Jeff Martin “may mean 100,000 jobs for the city and the surrounding areas once all the drilling and energy company jobs are fully tallied.” That would be a huge boost for the metropolitan area, which has 1.2 million workers, according to the Bureau of Labor of Statistics and a population of close to 2.4 million according to the Census Bureau. The Marcellus Shale is one of the largest natural gas finds in US history with a wellhead value of hundreds of billions of dollars.
Pittsburgh contains a larger than average share of aging housing stock. According to data from the American Community Survey, the average age of a home in Pittsburgh is 55 years compared to 37 years for the U.S. as a whole. Due to this fact, buyers of newly-constructed homes in Pittsburgh tend to be move-up and move-down buyers with some transferees with few first-time buyers. As a result, it is primarily the middle-aged and empty-nesters that are fueling the recent boom in construction activity.
Improving economic conditions have resulted in payroll employment growth of 32,000 since the trough in February of last year. Single family permitting activity is up to an annual rate of 2,672 per year from a pace of 1,836 at its trough set in January 2009 and house prices have moved up 13.1% since the same trough of January 2009. While new homes are being built in many parts of the Pittsburgh area, it appears that much of the activity is occurring in northern Alleghany, Beaver and Butler Counties.