Slides · Methodology

The American Enterprise Institute’s Housing Center released its monthly update to the AEI Housing Market Indicators on August 02, 2021.

• Foot traffic is slowly trending up.
  • The national foot traffic level is currently at 79 percent. Since the vaccination rollout, foot traffic has increased by 20 ppts. from the beginning of the year, and 44 ppts. from the trough.
  • However, this trend has plateaued since April.
  • Foot traffic in rural areas and smaller metros are above or close to pre-pandemic level. However, foot traffic in the largest 10 metros, which account for 33 percent of GDP, was still at 65 percent in week 28, 2021.
• The home price boom continues, with the national rate of Home Price Appreciation (HPA) for June 2021 coming in at 15.6 percent (preliminary), up from 6.5 percent in May 2020.
  • The Fed’s monetary punchbowl is fueling rampant home price appreciation.
  • Preliminary numbers for June 2021 indicate that the low price tier continued to have strong HPA, although the med-high and high price tiers, which are more dependent on the monetary punch bowl, are showing the strongest rates of appreciation. This is a trend reversal, since historically the low price tier has shown the fastest y-o-y HPA.
  • Starting with June 2020, months’ supply levels started to drop precipitously across all price tiers.
  • Low mortgage rates combined with about one month’s supply mean that HPA will remain strong over the coming months, as also indicated by Optimal Blue data.
• For the moment, it looks as if the pandemic and WFH have caused a shift in utility preference from walkability to nearby amenities to amenities provided within one’s home.
  • Before the pandemic, people highly valued walkability and were willing to pay up for homes with a high level of walkability. With the onset of the pandemic, this trend has flipped and the least walkable areas are at an average of 15.8 percent (yoy), while the most walkable quintile is appreciating at 12.4 percent (yoy).
  • We also detail the arbitrage opportunity for moving to less expensive areas. This opportunity always existed. Due to Work from Home, it now applies to more people. The arbitrage opportunity is especially large for the San Jose-San Francisco CSA.
  • At a special briefing on Tuesday, August 10th, we will discuss the new opportunities this creates for Walkable Oriented Development (WOD).

The AEI Housing Market Indicators provide accurate and timely metrics for the housing market. These include Mortgage Risk/Leverage (with a particular focus on agency first-time buyer volume and risk), house prices and appreciation trends, housing sales (new and existing sales whether institutionally financed, cash, and other-financed), and inventory levels. Since the housing market is influenced by many different factors, all need to be considered together to better understand market trends.