AEI Housing Market Indicators, June 2021

Slides · Methodology

The American Enterprise Institute’s Housing Center released its monthly update to the AEI Housing Market Indicators on June 7, 2021.

• Foot traffic is slowly trending up.
  • Foot traffic levels in the US are currently at 79 percent compared to the beginning of 2020. However, this is up from a low of 35 percent at the trough of 59 percent as recently as February 21.
  • The Southwest, South, and Midwest regions continue to outperform the national average despite recent decline due to April snow. Among the lagging regions, the Northeast and the West are slowly increasing, benefitting from loosening up COVID restrictions and warmer weather.
• The home price boom continues, with the national rate of Home Price Appreciation (HPA) for April 2021 coming in at 13.6 percent (preliminary), up from 6.6 percent in April 2020.
  • The Fed’s monetary punchbowl is fueling rampant home price appreciation.
  • 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 Work from Home (WFH) have caused a shift in 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 now appreciating the fastest. Over the last two months, the gap has widened.
  • There may be evidence that this trend reversal is structural because of:
    • WFH is likely here to stay and expand;
    • Higher income workers, who have greater opportunities to WFH, are able to profit from arbitrage opportunities offered by vastly different home prices across metros and regions; and
    • WFH has caused new utilities to be more valued than walkability: greater living area and office space, room for children, larger lots, a new home, nearness to family, and access to open spaces.

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.