With most economists and builders expecting a continued flat national market this year, this may not seem like the best time to be selecting the "healthiest" markets in the country. Virtually every market was down last year. But a close look at the numbers reveals that some markets have way outperformed others during the last four years and are likely to continue to do so this year.

When the housing market stages its official recovery, there are markets likely to lead the parade. It may take a year or more for the weakest markets--where burgeoning foreclosure sales are still pounding new home values, making building and selling new homes an exercise in futility-- to finally stage a turnaround.

The healthiest markets have many things in common. Most of them are great places to live, either close to the ocean, mountains, or major universities. Most of them didn’t have a huge run-up in prices during the boom and aren’t experiencing rampant deflation during the bust.

To compile our top markets, we analyzed the top 75 housing markets in the country. We ranked them based on population trends and job growth, perennial drivers of housing demand. We also examined what’s happened with home prices; many of the healthiest markets have managed to hold the line on home values. And finally, we considered the rate building permits, which may be the single best ongoing indicator of builder confidence in a market. We combined all these metrics to produce a score for each market and here is the top ranked market.

The Healthiest Market for 2009

No End Date for this image
 
1. Houston, Texas

2008 Total Building Permits: 42,697

They like to do things big in Houston. Now the metro area, home to more than 5.8 million people, can lay claim to being the largest home building market in the country, with 42,697 building permits. The market is still benefiting from an influx of population and jobs and rebuilding in the wake of Hurricane Ike. Employment was up 2.5 percent last year, representing the addition of an incredible 65,000 jobs. Home building activity in Houston has only fallen 31 percent since 2005. Also, existing-home prices rose in Houston through the first three quarters of last year. They finished the year at a median of $151,600, even with the previous year. Roughly one-third of the home building action is in Harris County, followed by Houston proper and Fort Bend County. One of Houston’s largest builders, Royce Homes, shut down last year, and Kimball Hill, one of the biggest builders in Texas, closed its doors this year after it failed to find a buyer.

Busiest builders: Lennar, Perry Homes, David Weekley Homes, MHI/McGuyer Homebuilders, and KB Home. Courtesy: Hanley Wood Market Intelligence.