AEI housing market indicators, June 2020

June 3, 2020

The American Enterprise Institute’s Housing Center released its monthly update to the AEI Housing Market Indicators on June 3rd, 2020.

This month’s main takeaways include:

• In a continuation of last week’s strong upward trend, purchase rate lock volume for the week of May 25 (Week 22) was up 19 percent from a year ago, providing further evidence that the worst of the near-term effects of the COVID-19 pandemic lockdown may be behind us.
  • Purchase rate lock volume is back to its level from before the onset of the pandemic (Weeks 1-8), when purchase rate lock volume was up 24 percent on average compared to 2019.
  • Over the past four weeks, the market has not only returned to normalcy, but is up substantially from Weeks 14-18, when the average weekly year-over-year decline was 15 percent.
  • As a result of the last two weeks’ strong purchase lock volume, combined with strong volume in Weeks 1-13, year-to-date volume is now running 12 percent ahead of last year.
• At the metro level, metros that experienced strong tailwinds before the pandemic are the ones experiencing the same strong tail winds again.

• Geographic areas less affected by the pandemic and which are reopening more rapidly will benefit from more favorable economic tailwinds. These are largely metros in the South and Southwest that were already doing well pre-pandemic.
• Metros in the West, Northeast, and Midwest that take longer to safely reopen will face economic headwinds.
• With the onset of the COVID-19 pandemic, there are changes to the mix of borrowers.
  • The share of borrowers with the highest credit scores now stands at a higher level than before the pandemic.
  • The share of second homes set a new series’ high, while the share of investment homes remains low.
  • Tightening of credit standards was both welcome and targeted.
  • Repeat buyers are coming back into the market.
• National home price appreciation (HPA) appears to be back in the 5-6 percent range, similar to before the pandemic.

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.

Source:  AEI Housing Center, www.aei.org/housing