AEI Housing Market Indicators release on March 2019 data – We are all Jeffersonians, We are all anti-Jeffersonians – AEI

2nd July 2019 Off By binary
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Slides · Methodology

The American Enterprise Institute’s Center on Housing Markets and Finance released its monthly update to the AEI Housing Market Indicators on May 28, 2019.

This month’s main takeaways include:

  • The US housing market continues to heat up for entry-level buyers:
    • Preliminary numbers for May 2019 indicate national HPA of 4.0% (yoy), which is up from 3.7% in January 2019.
    • HPA remains strongly bifurcated. HPA in low price tier is up 6.2% (yoy), while HPA in high price tier is down 2.3% (yoy).
  • Recent swings in rates offer a natural experiment to validate the two punchbowl theory:
    • First-time buyers with access to leverage and rate punchbowl have been better able to withstand rate increases.
    • Repeat buyers with only access to rate punchbowl have been retreating.
    • This is evidenced by slower HPA and looser supply for the move-up than the entry-level segment.
  • Mortgage risk continued to increase:
    • Composite Purchase National Mortgage Risk Index set an all time series’ high in March.
    • The index was up 0.5 percentage points from March 2018.
    • It is too early to tell if changes to FHA’s Total Scorecard have reigned in some of FHA’s worst practices.
    • Regulators should reign in competition between the GSEs and FHA that ultimately result in adverse selection for agencies, higher home prices, and greater taxpayer exposure.
  • Share of risk layered purchase loans is increasing:
    • Closely tracks the expansion of > 43% DTI lending.
    • A greater share of high risk loans is associated with faster HPA at the census tract level.
    • Proposals such as substituting the current average prime offer rate (APOR) limit for the 43% DTI limit replaces one pro-cyclical policy with another.

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.

Please find materials from our monthly call below. If you would like to receive invitations to our monthly update calls, please email Neil.Filosa@aei.org. For data on mortgage risk, please use our Mortgage Risk Index Interactive.

Due to technical difficulties, audio recording is not available.

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