Housing Finance Watch and Inflation Watch

by | May 10, 2022 | Saul's Insights | 0 comments

Housing Finance Watch and Inflation Watch: Week 18 2022

by Ed Pinto

 

Key takeaways:

  • The 10-year old seller’s market continues, evidenced by:

    • Strong volume, in spite of a cumulative 33% increase in constant quality home price appreciation (HPA) since January 2020,
    • Historically tight supply,
    • The work from home revolution, and
    • Arbitrage opportunities due to wide intra-metro, regional, and national pricing differences.
  • Purchase volume for week 18 is down 6% but up 18% over 2021 and 2019, respectively. However, HPA remains strong. With no supply relief on the horizon, we expect y-o-y HPA to remain at 15-20% until rates are at 6% or more. At that point, demand should drop, and supply should grow, with the greatest HPA slowdown felt at the high end of expensive markets and low end of some FHA markets.

  • The Fed’s accommodative monetary policies of near-zero interest rates and quantitative easing have resulted in a wealth effect from the $18 trillion in stock market and home price appreciation gains. This wealth effect is driving strong demand pull inflation. These policies are also making homes increasingly unaffordable for potential low-income homebuyers. At the same time, general inflation is driving up the cost of food, energy, and other necessities.

PDF to full report

 

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