Slides · Methodology

The American Enterprise Institute’s Housing Center released its monthly update to the AEI Housing Market Indicators on September 27, 2021.

• Walkable Oriented Development (WOD) provides policymakers the common sense solution to cut the Gordian knot in overcoming Not-in-My-Backyard (NIMBY) opposition.
  • A WOD is an area within a 10 minute walk of a defined set of existing commercial amenities, currently set at 5 restaurants, bars or coffee shops.
  • Modestly increasing residential density in such areas even from a 1- to a 2-unit structure would result in a much needed and meaningful addition to our housing supply (up to 2 million units over 10 years), enhance the vibrancy of commercial areas, and yield a significant boost in property tax revenue.
  • WOD would bring housing closer to service jobs, thereby reducing transportation and housing costs, while freeing up time for other activities such as recreation and child care.
• Foot traffic is slowly trending up.
  • The national foot traffic level is currently at 78 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 66 percent in week 37, 2021.
• The home price boom continues, with the national rate of Home Price Appreciation (HPA) for August 2021 coming in at 16.4 percent (preliminary), up from 7.6 percent in August 2020.
  • The Fed’s monetary punchbowl (historically low interest rates) and the work from Home revolution are fueling rampant home price appreciation.
  • Preliminary numbers for August 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 1.2 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.