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Housing market trends: analyzing housing dynamics, evaluating mortgage risk, and understanding the impact of filtering on affordability

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  • Edward J. Pinto

    (AEI Housing Center at the American Enterprise Institute (AEI))

Abstract

Since 2012, the AEI Housing Center has been a leader in cutting-edge data and research on numerous housing market metrics such as mortgage risk, house price appreciation, new construction, and months’ supply of inventory. The AEI Housing Center’s research on mortgage risk led to the publishing of the stressed mortgage default rate (SMDR), which assesses the riskiness of loans and how loans originated today would fare under similar stress levels to ’06 and ‘07. During the pandemic, loose monetary and fiscal stimulus drove high house price appreciation, which has abated from the 2022 peak and is currently at 1.4%. We estimate that YoY HPA will be about 4% by year-end. Months’ supply remains historically tight at 2.4, contributing to the ongoing seller’s market. The housing supply shortage in many high demand metros has effectively halted the filtering process, where homes pass to lower-income residents as the structure depreciates, which is critical to ensuring housing affordability. Housing supply constraints and zoning regulations in places such as California interrupt the filtering process, leading to higher housing prices, higher displacement pressures, and greater levels of homelessness.

Suggested Citation

  • Edward J. Pinto, 2023. "Housing market trends: analyzing housing dynamics, evaluating mortgage risk, and understanding the impact of filtering on affordability," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 58(3), pages 149-157, July.
    • Handle: RePEc:pal:buseco:v:58:y:2023:i:3:d:10.1057_s11369-023-00328-0
    DOI: 10.1057/s11369-023-00328-0
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