Housing Finance and Inflation Watch Week 29

Housing Finance and Inflation Watch Week 29

Housing Finance and Inflation Watch Week 29

Housing Finance and Inflation Watch Week 29

Housing Finance and Inflation Watch Week 29

Housing Finance and Inflation Watch Week 29

Housing Finance and Inflation Watch Week 29

Housing Finance and Inflation Watch Week 29

Housing Finance and Inflation Watch Week 29

​​​​​​​Edward Pinto
07-27-2022
7 min

https://www.aei.org/research-products/report/housing-finance-watch-and-inflation-watch-week-29-2022/  

The Housing Center at the American Enterprise Institute (AEI) publishes a weekly Housing Finance Watch and Inflation Watch crafted by Edward J. Pinto, Director and Assistant Director Tobias Peter.

 

Housing Finance Watch

 

Purchase rate lock volume and Home Price Appreciation (HPA) continue to decelerate and confirm a strong trend

Reversal.  Notwithstanding rate and HPA headwinds, volume for 2022 week 29 came in below 2019’s level by 2%.

Additionally, HPA for August 2022 is projected at 10.2% and July 2022 is projected at 12.5%, down from 15.0% in June

 

Inflation Watch

 

Relatively low historical nominal rates (5.54% as of 7.25.22)

and negative inflation adjusted real rates, along with supply

constraints, a home equity wealth effect from monetary

stimulus, and the Work-from-Home revolution will continue

to fuel historically high HPA until later this year. If mortgage

rates remain around 6%, HPA is expected to further slow to

6% and 4%-6%, respectively, for December 2022 and 2023 (yo-y).

 

The Fed spiked the monetary punchbowl for too long, with the economy & housing market experiencing massive

hangovers. While in the midst of the most rapid slowdown in Home Price Appreciation (HPA) since the bust of 2007-

2011, demand pull inflation continues to exert a strong influence on general inflation. While HPA is rapidly slowing,

loan originations (other than FHA) continue to exhibit stressed mortgage default rates that will contain default levels.

 

For the week of July 29, 2022, the Report covers these

 

Key takeaways:

  • The 10-year old seller’s market continues, evidenced by:
    • Modest purchase volume declines, in spite of a cumulative 39% increase in constant quality Home Price Appreciation (HPA) since January 2020,
    • Historically tight supply,
    • The work-from-home revolution, and
    • Arbitrage opportunities due to metro & regional price differences.
  • Purchase volume for week 29 is down 25% and 2% from 2021 & 2019, respectively, with HPA projected to moderate to 10.2% in August.
  • If the current mortgage rate of around 6% holds, we expect December 2023 HPA to slow to 4-6% (y-o-y) as demand will further moderate and supply will increase.
  • HPA declines seem plausible at the high end of expensive markets, at the low end of some FHA markets, and in metros with stagnating or declining job growth.
  • While in the midst of the most rapid slowdown in Home Price Appreciation (HPA) since the bust of 2007-2011, demand pull inflation continues to exert a strong influence on general inflation.
  • While HPA is rapidly slowing, loan originations (other than FHA) continue to exhibit stressed mortgage default rates that will contain default levels.

PDF to Full Report: https://www.aei.org/wp-content/uploads/2022/07/Housing-Finance-and-Inflation-Watch-2022-Week-29-FINAL.pdf?x91208

Note: The American Enterprise Institute (www.aei.org)  is a public policy think tank dedicated to defending human dignity, expanding human potential, and building a freer and safer world. The work of our scholars and staff advances ideas rooted in our belief in democracy, free enterprise, American strength and global leadership, solidarity with those at the periphery of our society, and a pluralistic, entrepreneurial culture.

 

Edward Pinto

Edward J. Pinto is a senior fellow and the director of the AEI Housing Center at the American Enterprise Institute (AEI). He is currently researching how to increase the entry-level housing supply for first-time buyers and renters who earn hourly wages, as well as examining the current house price boom that began in 2012. This continues his previous work on the role of federal housing policy in the 2008 mortgage and financial crisis.

Contact: edward@dewardpinto.com
rats3898 none