Slides · Methodology

The American Enterprise Institute’s Housing Center released its monthly update to the AEI Housing Market Indicators on November 30, 2021.

• The Monetary, the Housing Leverage, and the Social Assistance Punch Bowls totaling $5.5 trillion are fueling a massive growth in aggregate demand.
  • Up until early 2020, consumer spending by Equifax Risk Score quintile generally went up in lockstep, however since the pandemic, there has been noticeable divergence due to the various punch bowls.
• The tendency to upsize has increased since the pandemic, especially for people moving within their metro.
  • New home purchases are on average 34 percent larger than the home sold for buyers staying in their same metro, compared to an average of 23 percent for people moving to a different metro.
  • Younger borrowers (potentially move-up buyers) are more likely to upsize.
• FHA serious delinquency levels continue to gradually decline from the pandemic-induced peak.
  • However, at the current rate of decline, it will take until June 2022 for them to reach pre-pandemic levels.
• A critique of Freddie Mac’s “Racial and Ethnic Valuation Gaps in Home Purchase Appraisals”
  • Freddie Mac’s note ignored size of the gap, which turns out to be relatively small (1–2 percent).
  • Freddie Mac’s note failed to account for other factors such as SES. When doing so, the gap for Black tracts disappears entirely and for Latino tracts it falls by half.
• Agency purchase loan volume continues to run high.
  • August 2021 volume was up 15 percent 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 October 2021 coming in at 15.8 percent (preliminary), up from 9.6 percent in October 2020.
  • The Fed’s monetary punchbowl (historically low interest rates) and the Work From Home revolution are fueling rampant home price appreciation.
  • Low mortgage rates, WFH trend, combined with about 1.3 months’ supply 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.