National Housing Market Indicators release for Q3 2018 – AEI – American Enterprise Institute: Freedom, Opportunity, Enterprise8th January 2019
The NHMI are published quarterly with a minimal time lag — Monday’s briefing covered sales transactions through the third quarter of 2018 and house price trends through November 2018.
Key-takeaways for this briefing included:
- In November 2018, the national house price boom continued — albeit at a slower pace — and now stands at 25 quarters.
- AEI’s House Price Appreciation (HPA) index for 73 metro areas increased 5.0 percent for November 2018 (year-over-year), down from 7.4 percent for November 2017 (year-over-year).
- House prices appreciated at a more rapid pace (6.6 percent) in the low price tier (about 27 percent of the market).
- House prices appreciated much more slowly (1.7 percent) in the high price tier (about 9 percent of the market).
On the demand side, there was a slight pull back in the purchase transactions during the most recent quarter.
- For the four quarters ending in 2018:Q3, 6.37 million sales transactions were reported.
- Sales transactions decreased 0.6 percent in the third quarter compared to a year ago, marking the 1st quarter of decreasing sales since 2014:Q1.
- Despite this, the national seller’s market continued and now stands at 75 consecutive months.
- For 2018:Q3, month’s inventory in the 73 large metros stood at 3.6 months (up from 3.0 months in 2017:Q3), an amount still indicative of a seller’s market. In terms of price tiers, month’s inventory moved modestly higher for the low (up 0.4 months to 2.8 months) and low-med (up 0.3 months to 2.6 months) price tiers, with the med-high (up 0.6 months to 4.2 months) and the high (up 1.2 months to 7.6 months) both showing larger increases, albeit from cyclical lows.
Mortgage risk continued to increase in September 2018. The composite Purchase National Mortgage Risk Index (NMRI) was up 0.4 percentage point from September 2017.
An analysis of the market by price tier and by metro area reveals that the market is becoming more bifurcated. Thus rumors of the end of Housing Boom 2.0 may well be exaggerated. We find:
- Buyers are moving away from larger cities, especially those that have experienced the fastest HPA since the boom started. As a result, demand appears to be shifting to smaller or medium sized areas, where HPA has so far lagged behind. In these laggards, HPA is holding steady or is even accelerating.
- A pull back on home prices in the high cost segment outside of the reach of government agencies, which tend to be more affected by rising mortgage rates, and in high-cost metros, especially on the West Coast.
- Supply remained a constraint especially at lower price points.
The NHMI, at the national and state levels, combines AEI Center on Housing Markets and Finance data on the federal agency market (Fannie Mae, Freddie Mac, Federal Housing Administration, Veterans Affairs, and Rural Housing Service) with data provided by First American via DataTree.com for the private side of the mortgage market and for cash and non-institutionalized lender sales. AEI and First American both provide data for the top metropolitan areas. The combined data set covers nearly 100 percent of the volume at the national, state, and metro levels. To account for the small amount of incomplete data, housing data are scaled to estimate total volume market at the various reported levels. House price trends come from Public Records data, also provided by First American via DataTree.com and currently cover the largest 73 metropolitan areas in the country.
Monday’s NHMI briefing reported on sales transactions from the fourth quarter of 2012 through the third quarter of 2018 based on more than 34 million home sales transactions and on house prices through November 2018 based on over 10 million institutionally-financed home sales transactions.
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