The U.S. Housing Market Is Taking A Beating From Coronavirus

May 3, 2020 Topic: Economics Region: Americas Blog Brand: The Buzz Tags: Housing MarketCoronavirusGDP

The U.S. Housing Market Is Taking A Beating From Coronavirus

But it's not all bad news.

The American Enterprise Institute’s Housing Center released its monthly update to the AEI Housing Market Indicators on April 29th, 2020.

This month’s main takeaways include:

  •  Purchase loan rate lock activity continued to decline.
    • For the week of April 20 (week 17), purchase loan rate lock activity was 17 percent below that for week 17 in 2019.
    • However, activity may be down as much as 28 percent after taking into account that activity in January and February 2020 (weeks 1-8) was running 16 percent ahead of the same period in 2019.
    • There are important differences across metros. Rate locks in some metros are holding up much better than in others.
    • Detroit, Pittsburgh, and San Francisco have seen large declines, while Nashville, Columbus, and Jacksonville are weathering the storm rather well.
  • With the onset of the COVID-19 pandemic, we observe important share shifts in the market.
    • Highest quality borrowers are either dropping out of the market or are unable to get non-conforming jumbo loans.
    • At the same time, FHA, VA, and Rural Housing Service borrowers with FICO score below 640 are increasingly unable to get mortgages as lenders tighten lending standards.
  • An estimated 4.0 million loans are already in forbearance through April 27, 2020.
  •  The rate of home price appreciation (HPA) continued to accelerate for February, but rate lock data indicate it will soon begin to decelerate.
    • Prelim. numbers for March 2020 indicate national HPA of 6.9 percent (yoy), up from 6.5 percent from Feb. 2020.
    • HPA for the week of April 20, 2020 (week 17) was 4.0 percent, down from 7.2 percent during week 10.
    • HPA in San Francisco and Charlotte has decelerated the most, while a few other metros such as Las Vegas and Phoenix still have strong HPA.
    • So far however, only two among the largest 40 metros are exhibiting consistent year-over-year HPA declines over the last three weeks: San Francisco and Los Angeles

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.

Please find materials from our monthly call here. If you would like to receive invitations to our monthly update calls, please email [email protected]. For data on mortgage risk, please use our Mortgage Risk Index Interactive.

This article first appeared at the American Enterprise Institute.

Image: Reuters.