The latest news from the housing industry isn’t too encouraging: Home sales are falling again, and home prices dropped to a post-recession low in the first quarter. Yet, despite such gloom, the homebuilding industry may be turning a corner. Incomes are rising again in most major U.S. metropolitan areas, so household budgets are improving and people are starting to make large purchases again. Will homebuying—and new-home building—be next? The answer may be yes, especially in a number of southern metro areas, according to a new forecast. 

Builder magazine compiles an annual Healthy Markets Index for the homebuilding industry. It predicts upcoming housing activity based on trends in single-family and multifamily permits, along with home sales and home prices. It also considers demographic and economic indicators such as population, job, and income growth. As it turns out, the major metro areas forecasted to have the healthiest housing markets in 2011 are concentrated in the South, spanning from Washington, D.C., to central Texas. The ten best markets for 2011 include three metros in North Carolina and four in Texas. The only nonsouthern metropolitan area in the top ten is Minneapolis/St. Paul. 

These top ten markets are forecasted to experience, on average, 50 percent growth in permit activity this year. The implication for ULI members is that the housing recovery is starting in places where price appreciation didn’t get out of hand during the housing boom, where homes remain relatively inexpensive, and where economies and employment are picking up.

Here are the top ten larger metro areas in the Healthy Markets Index for 2011:

Rank

Metro Areas with Over 450,000 Population

2011 Building Permit Forecast

2011 Building Permit Growth

Housing Market Health Indicator

1

Raleigh, NC

9,604

90%

86.9

2

Austin, TX

11,079

57%

86.5

3

Durham/Chapel Hill, NC

3,250

70%

81.5

4

Minneapolis/St. Paul, MN

9,403

66%

77.6

5

Houston, TX

34,763

30%

77.3

6

Charlotte, NC

9,494

65%

76.6

7

San Antonio, TX

8,002

23%

75.6

8

Washington, D.C.

20,397

32%

74.8

9

Dallas, TX

30,630

52%

70.7

10

Birmingham, AL

1,657

4%

70.1

Source: Builder magazine.