AEI housing market indicators, October 2021

Slides · Methodology

The American Enterprise Institute’s Housing Center released its monthly update to the AEI Housing Market Indicators on November 01, 2021.

Audio Recording

  • For the second month in a row, Freddie securitized the most mortgages in the market, again overtaking Fannie, which has historically been the leader.
    • In June 2021, Freddie issued more single-family MBS than Fannie for the first time.
    • In July, Freddie’s share further increased to 53%, setting another series’ high. This trend has been supported by the development and launch of the Uniform Mortgage-Backed Security (UMBS) in 2019.
  • 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.
    • After end of the foreclosure moratorium on July 31, 2021, FHA foreclosures are starting to climb again but they remain below their pre-pandemic level.
  • Foot traffic is slowly trending up.
    • The national foot traffic level is currently at 79%. Since the vaccination rollout, foot traffic has increased by 20 ppts. from the beginning of the year and 44 ppts. from the trough of the pandemic.
    • However, this trend has plateaued since April 2021.
  • Agency purchase loan volume continues to run high.
    • July 2021 volume was up 14% 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 September 2021 coming in at 16.3% (preliminary), up from 8.4% in September 2020.
    • The Fed’s monetary punchbowl (historically low interest rates) and the Work From Home revolution are 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 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.

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