Slides · Methodology

The American Enterprise Institute’s Housing Center released its monthly update to the AEI Housing Market Indicators on January 04, 2021.

• Low income and minority borrowers are crowded out by rapid Home Price Appreciation (HPA).
  • The census tracts that experience the highest levels of HPA and the highest income growth are also those with the highest share of FHA purchase loans and minority borrowers.
  • The top one-third of large metros with the highest growth in HPA have seen a 13 percentage point reduction in FHA purchase loan share compared to a 6 percentage point reduction for the two-thirds of metros with lower levels of HPA.
  • There is a clear inverse relationship between the price-to-income ratio of a metro and its homeownership rate. The disparate impact results from federal monetary and housing policies and is a violation of the Fair Housing Act.
• FHA serious delinquency levels continue to gradually decline from the pandemic-induced peak.
  • In November 2021, the FHA serious delinquency level dropped to 7.8% from 8.4% in October 2021. This continues the gradual decline from the pandemic-induced peak of 12%.
  • However, at the current rate of decline, it will take until June 2022 for them to reach pre-pandemic levels.
• Agency purchase loan volume continues to run high.
  • September 2021 volume was up 24% compared to 2019.
  • Based on Optimal Blue data, we expect the final months of 2021 volume to continue running well above previous years (excluding the second half of 2020 due to COVID-related disruptions).
• The home price boom continues with the national rate of Home Price Appreciation (HPA) for November 2021coming in at 15.8% (preliminary), up from 10.1% in November 2020.
  • The Fed’s monetary punchbowl (historically low interest rates) and the Work From Home (WFH) revolution are fueling rampant home price appreciation.
  • Starting with June 2020, months’ supply levels started to drop precipitously across all price tiers.
  • The continuing low mortgage rates, WFH trend, and arbitrage opportunities, along with a 1.2 months’ supply nationally mean that HPA will remain strong over the coming months, as also indicated by Optimal Blue data.

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.