AEI Housing Market Indicators, July 2023

Video Recording

Key Takeaways

• Purchase rate lock volume was down 43% from the same week in 2019.
  • April 2023 agency purchase loan volume decreased by 1% from March 2023 and is currently at 2013 levels.
• Year-over-year (YoY) home price appreciation (HPA) has begun to accelerate.
  • June 2023’s YoY HPA was 2.9%, up from 2.1% a month ago but down from 14.3% a year ago.
  • YoY HPA has bottomed out and is expected to continue rising through August 2023 based on Optimal Blue data
  • This is largely due to historically low supply, cooling yet still strong job numbers, low levels of foreclosures in most areas of the country, work from home, and continued home price arbitrage opportunities
  • While demand is down, buyers are well-qualified and highly motivated by historically tight supply.
• Supply-demand dynamics are vastly different among the largest 60 metros.
  • Months’ remaining supply was 3.1 months (not seasonally-adjusted) in June 2023. Housing inventory continued to run below pre-pandemic levels and showed minimal seasonal increase, which helps explain the recent MoM home price appreciation increases.
  • Metros in the Midwest generally have extremely low months’ supply, indicating a strong seller’s market.
  • Compared to a year ago, months’ supply in June 2023 increased in most of the largest 100 metros for all four price tiers.
• There has been a share shift from banks, especially large ones, to nonbanks for both GSE and FHA loans.
  • This shift accelerated during the pandemic for GSE purchase and refinance loans.
  • A less dramatic market shift occurred from large banks to nonbanks for FHA loans during the pandemic, as banks had already largely exited from this market.
• The first-time buyer (FTB) share has rebounded from its pandemic lows.
  • FHA has regained its position as the main agency vehicle for FTBs.
  • There is a wide gap in the stressed mortgage default rate between first-time buyers and repeat buyers.
• The share of appraisal waivers for both GSEs combined for May 2023 stood at 13%, the same as last month but down 36 ppts. from its series’ peak in March 2021.
  • However, Fannie has nearly double the waiver use as Freddie.
  • Overall, on a risk-adjusted basis, loans with an appraisal waiver have experienced lower default rates than those with a human appraisal.

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