Is a slowing housing market good for the housing industry? When Alan Greenspan recently hinted that short-term interest rates need to lower, the stock market sent homebuilder stocks up 11 percent. And what is good for the building industry can also be good for Realtors.

Meyers Group, a national provider of residential development information, research and consulting services, has just released the third quarter issue of U.S. Housing Markets, has issued a report that shows the housing market cooling off during the third quarter, which can be interpreted as good news for the housing industry.

According to the report, investor caution will ultimately help housing construction slow along with the economy, avoiding the substantial overbuilding scenario that occurred 10 years ago. Meyers Group believes it is in the long-term best interests of the housing industry to have a slowdown in national construction now, rather than a steep decline later.

Although the economy cooled, it still remained strong during the third quarter. The U.S. employment base has grown 1.9 percent over the last year, which is comparable with the average over the last 20 years and is still more than double the rate of population growth.

Consumer confidence remains high at 133.5, which still rates an "A" grading based on the company's analysis of the index over the last 20 years. Builder confidence also increased during the quarter. The National Association of Homebuilder's Housing Market Index rose from 58 in June to 65 in November.

New Homes

In the third quarter, the housing market continued a minimal slowdown. Year-to-date single-family permits are running 4 percent behind last year, which is the same pace that occurred through the second quarter. Single-family permits declined slightly, from 1,224,188 for the 12 months ending June to 1,204,275 for the 12 months ending in September. During the same period, multifamily permits also declined slightly from 413,397 to 407,981.

Housing Growth

The fastest growing markets are in the South. Charlotte, N.C. is the furthest north housing market among the 10 fastest growing housing markets as measured by Meyers Group's Market Hotness Index. Fifty-three of the 75 largest markets covered in this report are growing faster than the U.S. average of 5.8 new housing units per 1,000 people.

Multifamily

Florida leads the fastest-growing apartment markets. With almost 4,000 MF permits over the last 12 months, Naples, Fla. is the fastest growing apartment market, as ranked by the company's Market Hotness. Ft. Myers, Fla. is the third fastest growing market (4,077 permits) and Orlando, Fla. is the fifth fastest growing market (11,085 permits).

Investment

The U.S. housing demand/supply imbalance continued this quarter, although it moderated from the previous quarter. The company's Investor Hotness Index (IHI), which measures employment-generated housing demand in comparison with housing supply, declined from 1.38 as of September 2000. Over the 12 months ending in September, the United States generated 35 percent more housing demand than was supplied.

The demand and supply imbalances vary greatly by market, with demand significantly exceeding supply in New England, the Mid-Atlantic, and the Pacific. Supply generally exceeds demand in the Great Lakes and East South Central divisions. Individual market demand varies.

Interestingly, the two slowest growing housing markets, Los Angeles and Long Island, New York are the two best markets for investment as measured by the company's IHI. Los Angeles, however, is making inroads with respect to adding supply. With 31 percent more permits issued over the last 12 months than over the previous 12 months, Los Angeles ranks as the fastest growing housing market in the country.

Published: December 21, 2000

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