The American Enterprise Institute’s Housing Center released its monthly update to the AEI Housing Market Indicators on January 5, 2021.
This month’s main takeaways include:
- Driven by the lowest mortgage rates in history, counts for all loan purposes were at or near series’ highs in September 2020. No cash out and cash out refinances are blowing past their prior highs.
- Compared to a year ago, no cash out refis are up 177 percent and cash out refis are up 39 percent.
- Agency purchase loan volume in September set a new series’ high for that month, bucking the usual seasonal decline. YTD volume is up 40 percent compared to a year ago.
- Appraiser racial bias is uncommon and not systemic.
- Recent examples in media show cases of appraisal 1 coming in an average of 25 percent lower than appraisal 2.
- We analyzed using big data to inform as to whether it is common or uncommon that an appraiser’s knowledge of an applicant’s race results in valuation bias.
- We conclude that incidents where knowing the race of the applicant results in racial bias by appraisers on refinance loans are uncommon and not systemic. This same analysis supports the conclusion that unintentional bias based on race is also uncommon and not systemic.
- The Carpenter Index and Tech Worker Index in 2019
- The Carpenter Index combines both local wages and home prices into an affordability measure for blue-collar employees we depend on to build new homes. Similar to 2018, San Diego ranked as the least affordable, while there was a tie among mostly Midwestern metros for most affordable.
- Tech workers are a proxy for a professional or white-collar workers making the Tech Worker Index a useful way to illustrate why the Work from Home (WFH) explosion has fueled the Great American Land Rush. San Jose, LA, Oxnard, CA, San Francisco, Honolulu, and San Diego ranked as the least affordable metros.
- Preliminary national rate of Home Price Appreciation (HPA) for November 2020 was 10.3 percent. HPA has reached yet another peak for the year and is up from 6.0 percent in November 2019.
- HPA has picked up across nearly all major metros as the months’ supply remains at very low levels compared to prior years.
- Low mortgage rates combined with about two months’ supply mean that HPA will remain strong over the coming months as also indicated by Optimal Blue data.
- During Housing Boom 2.0, we are again observing the largest HPA boom at the lower end.
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.
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If you would like to receive invitations to our monthly update calls, please email Michael.Howard@aei.org. For data on mortgage risk, please use our Mortgage Risk Index Interactive.
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