Housing Market Recovery Tracker: The NAHB Improving Markets Index and What It Means for Builders
When the National Association of Home Builders (NAHB) releases its Improving Markets Index (IMI) each month, builders across the country pay close attention. This index provides a data-driven snapshot of which metropolitan areas are seeing genuine, sustained improvement in their housing markets. In March, the IMI reached 99 markets, signaling that nearly one quarter of all U.S. metropolitan areas have turned a corner in their economic recovery. For builders planning their next project, understanding this index can be the difference between building in a market poised for growth and one that remains sluggish. This article breaks down how the IMI works, what the latest data reveals, and how you can use this information to make smarter business decisions.
If you are navigating uncertain conditions, our guide on smart strategies for builders facing a housing market slowdown offers practical approaches for maintaining momentum in any economic climate.
How the NAHB Improving Markets Index Works
The IMI is not a subjective measure of market sentiment. It is a quantitative tool that tracks three independent data sets to determine whether a metropolitan statistical area (MSA) is genuinely recovering. A market must show improvement in all three areas for at least six consecutive months after their respective troughs before it earns a place on the list.
The Three Core Indicators
Each of the three indicators measures a different dimension of housing market health:
- Employment growth sourced from the Bureau of Labor Statistics tracks whether local job markets are expanding. Employment is the foundation of housing demand because people need jobs before they can buy homes.
- House price appreciation provided by Freddie Mac measures whether home values are stabilizing or rising. Price growth signals buyer confidence and equity accumulation.
- Single-family housing permit growth from the U.S. Census Bureau tracks whether builders themselves are confident enough to seek permits for new construction. This is the most forward-looking indicator because permits precede construction starts.
A market needs all three indicators moving in the right direction simultaneously. A city might have strong job growth but falling home prices, or rising permits but weak employment. Only when all three align does NAHB consider that market to be truly improving.
Why Six Months of Consecutive Improvement Matters
The six-month requirement filters out temporary spikes or seasonal fluctuations. A market that adds construction jobs for one month and loses them the next does not qualify. This persistence requirement means that markets on the IMI list have demonstrated genuine, durable recovery rather than a short-term bounce. Builders can look at the IMI list with reasonable confidence that these are markets where housing demand will continue to strengthen.
What the March IMI Data Reveals About Market Conditions
In March, the IMI reached 99 markets, up by a net gain of one from February. While the headline number moved only slightly, the composition of the list changed significantly. Thirty-one new markets joined the index while 30 markets dropped off, indicating that the recovery is shifting geographically rather than stalling.
Notable New Entrants
Several major metropolitan areas joined the improving markets list in March:
- Orlando, Florida entered the list as Florida housing markets continue to draw buyers and employers. The Orlando market benefits from population inflows and a diversifying economy beyond tourism.
- Rochester, New York returned as its employment data strengthened, reflecting the stabilizing effect of healthcare, education, and tech sector jobs in upstate New York.
- Columbus, Ohio joined the list on the back of steady employment growth driven by logistics, insurance, and technology sectors that have made Ohio’s capital one of the Midwest’s most resilient housing markets.
- Austin and San Antonio, Texas both entered the index. Texas already led all states with 12 markets on the IMI list, and these additions reinforce the strength of the Texas housing economy. Austin continues to attract population and business relocations, while San Antonio benefits from more affordable pricing relative to its northern neighbor.
Markets That Returned After Data Revisions
Several metros returned to the list as a result of revised employment data. Anchorage, Alaska; Iowa City, Iowa; Washington, D.C.; and Jackson, Mississippi all rejoined after updated Bureau of Labor Statistics data showed stronger job market conditions than earlier reports had indicated. This highlights an important nuance: some markets may have been improving all along, but lagging data delayed their recognition on the index.
Geographic Distribution
The 99 improving markets span 33 states and the District of Columbia. Ten states now have four or more metros on the list. Texas leads with 12 entries, followed by Florida, Ohio, and North Carolina. The broad geographic reach of the index suggests that the housing recovery is not confined to one region but is spreading across diverse local economies.
Using the IMI for Strategic Business Decisions
The IMI is more than a news headline. For builders, it can guide decisions about where to invest resources, how to time project starts, and how to evaluate market risk.
Market Selection for New Projects
If you are considering expanding into a new metro area or opening a new division, the IMI provides a credible, data-backed shortlist. Markets that have maintained IMI status for multiple consecutive months offer the strongest signal of sustained recovery. Builders can prioritize these markets for land acquisition and community development.
| IMI Status | What It Means for Builders | Suggested Action |
|---|---|---|
| New entrant (1-3 months on list) | Market is showing early recovery signs across permits, prices, and jobs | Begin feasibility studies; monitor permit trends monthly |
| Established (4-12 months on list) | Recovery is durable and broad-based | Actively pursue land acquisition and development planning |
| Long-term (12+ months on list) | Market has sustained improve-ment across multiple cycles | Full-scale investment; consider multiple communities |
| Dropped from list | Softening in one or more indicators; recovery may be stalling | Reassess exposure; delay new starts until conditions improve |
For builders working in markets that have dropped off the IMI list, understanding how to prepare for the shift to a buyers market can help protect margins and maintain sales velocity.
Timing Land Acquisition and Development
The IMI is a trailing indicator, not a leading one. By the time a market appears on the list, it has already shown six months of improvement. That means the best time to enter may already be passing in fast-moving markets. However, for builders who plan 12 to 24 months ahead, the IMI helps validate that a market has genuine momentum. If your land acquisition team has identified a target market, checking its IMI status adds a useful layer of confirmation.
Evaluating Partnership and Joint Venture Opportunities
When evaluating potential joint venture partners or land sellers, IMI data provides an objective benchmark. If a partner is promoting a development in a market that has consistently appeared on the IMI list, the demand fundamentals are quantifiably stronger than in markets that have never qualified. This can simplify the underwriting process and help secure financing from lenders who trust data-driven market analysis.
Limitations of the Index and Complementary Data Sources
The IMI is a powerful tool, but it has limitations that builders should understand before relying on it exclusively.
What the IMI Does Not Measure
The IMI focuses on permits, employment, and home prices. It does not measure:
- Rental market conditions or multifamily vacancy rates, which are important for build-to-rent and multifamily developers.
- Lot supply and entitlement timelines, which directly affect how quickly builders can deliver homes in improving markets.
- Local regulatory environments such as impact fees, zoning restrictions, and permitting delays that can make a strong demand market difficult to build in profitably.
- Mortgage rate sensitivity and affordability erosion that can suppress demand even when jobs and permits look healthy.
Building a Complete Market Intelligence Picture
To build a robust market strategy, pair IMI data with additional sources:
- Housing starts and completions data from the U.S. Census Bureau shows actual construction activity, not just permits. A market with rising permits but flat starts may have entitlement bottlenecks. Our analysis of what housing starts data really tells builders about market health covers how to interpret these numbers.
- Building materials cost indices track whether input costs are eroding margins in improving markets. Strong demand is less valuable if material price spikes eat into profitability.
- Local employment composition matters. A market reliant on a single industry faces higher risk if that sector declines. Markets with diversified employment bases tend to sustain housing recovery longer.
- Population migration data from sources like IRS tax filings and U-Haul migration reports reveals whether markets are gaining or losing households. In-migration sustains housing demand over the long term.
Builders who have weathered previous cycles know that navigating housing market cycles with confidence requires using multiple signals rather than relying on any single indicator. The IMI is best understood as one data point in a broader analytical framework.
The Patchy Recovery Pattern
NAHB Chief Economist David Crowe described the March data as consistent with a “gradual but patchy recovery in which some month-to-month softening is likely.” This pattern has important implications for builders. Even in a generally improving national environment, individual markets can slip on and off the list. A market that drops off does not necessarily mean it is collapsing. It may reflect small movements in house prices or permit counts that are temporary. Builders should examine why a market was removed before making drastic decisions. In many cases, the underlying trend remains positive even if a single month’s data point fell short.
Putting the IMI to Work in Your Business
The NAHB Improving Markets Index reaching 99 markets in March is a meaningful milestone. It tells builders that nearly one in four U.S. metros has shown sustained improvement in employment, home prices, and building permits. The geographic diversity of the list, spanning 33 states, confirms that the housing recovery is broad-based rather than concentrated in a handful of hot markets. For builders making decisions about land acquisition, project timing, and market entry, the IMI offers a credible, data-driven starting point. By combining IMI analysis with housing starts data, material cost trends, and local market knowledge, builders can position themselves to capitalize on the improving conditions while managing the risks that remain in a still-uneven recovery.