Consumer demand and record inventory shortages persist despite high inflation and geopolitical uncertainty. In March, urban consumer price inflation hit 8.6%, the highest percent increase since 1981.1 The average 30-year fixed-rate mortgage ended March at 4.7%, almost twice as high as the historic low of 2.7% in the winter of 2020, and nearly as high as the peak mortgage rates seen in the 2010s.2 Russia’s invasion of Ukraine at the end of February fueled further rises in energy prices, which may lead to additional interest rate hikes by the Federal Reserve in an attempt to tame inflation.3
Despite these factors, the 20-city Amherst Home Price Appreciation Index (HPA) grew 19.9% year-over-year (YoY) in March 2022, only two percentage points (pp) lower than the peak in June 2021. In fact, the HPA has not dipped lower than 18.5% growth in 11 months. March’s 9.6% drop in YoY for-sale inventory and nearly record-high 30-day absorption rate of 18.0% suggests that the primary cause behind rising prices is the outsized consumer demand for homes.
The 20-city Amherst Single-Family Rent Growth Index was similarly high. At 9.8% YoY, March was the ninth consecutive month with rent growth above 9%. Consistent with home price growth, consumer demand is the main driver of rent growth. 30-day absorption rates reached an all-time high in the summer of 2021, and despite briefly dipping in the 2021 winter months, have since rebounded to over 60%.
Amherst Home Price Appreciation Index
Florida contains 12 of the 20 fastest growing U.S. markets, according to the March market-level HPA. Naples, FL topped the list with March YoY growth of 51%, over 10 pp higher than the next two fastest-growing markets. Breaking up Florida’s domination of the top 20 are three Tennessee cities with 40%, 32%, and 30% growth in Sevierville, Nashville, and Kingsport, respectively.
The remaining top 20 cities all exceeded 30% YoY growth and were diversified across the country including in Montana, North Carolina, Arizona, Pennsylvania, and California. Demand for homes in the suburbs and relatively affordable small cities remains the highest. Yet, the presence of larger cities in the top 20, such as Raleigh, Tampa, Orlando, Phoenix, and San Diego, suggests that the suburbs are not the only places in high demand.
Amherst Rent Growth Index
Single-family rent growth follows the rising interest rates and persistent home-price appreciation that fuel demand for rental homes over ownership. According to the Amherst Single-Family Rent Growth Index, thirteen of the 20 fastest growing rental markets in March were in Florida. Rent growth ranged from 19% in Crestview to 28% in North Port. The remaining seven markets were spread across Virginia, Tennessee, California, Arizona, Connecticut, and Pennsylvania.
1Consumer Price Index for All Urban Consumers data. U.S. Bureau of Labor Statistics. Distributed by the St Louis Federal Reserve Bank. Tabulated by Amherst Research as of April 27, 2022.
230-Year Fixed Rate Mortgage Average in the United States. Freddie Mac. Distributed by St Louis Federal Reserve Bank as of April 27, 2022.
3Paul Kirby, Why has Russia invaded Ukraine and what does Putin want?. BBC News. April 17, 2022.
The Amherst Home Price Appreciation Index (HPA) tracks home price changes in the same 20 Metropolitan Statistical Areas (MSAs) that are used to construct the S&P CoreLogic Case-Shiller 20-City Index. Amherst also tracks market-level home-price changes to produce home price indices for over 200 Core-Based Statistical Areas (CBSA) in the United States. The index is published on a monthly basis and is based on the Case Shiller repeat-sales methodology. Unlike the indices published by S&P CoreLogic Case-Shiller and the Federal Housing Finance Agency (FHFA), the Amherst HPA is a distressed-free index which does not include price changes due to foreclosures, short-sales, bank repossession, and REO resale. The use of Multiple Listing Services (MLS) data that are supplemented by CoreLogic off-market data allow the HPA to have a timelier look at monthly shifts in the housing market than some other leading market indices.4
The Amherst Rent Growth Index follows single-family detached homes rent price changes for the same MSAs that are used to construct the S&P CoreLogic Case-Shiller 20-City Index. Amherst also follows market-level statistics for over 150 CBSAs in the United States. The index is published every month and uses a repeat-rent methodology similar to the one employed for the Amherst HPA. The index incorporates both MLS and Altos rental data to produce a timely rent index.
Due to the early nature of our estimates, our indices for prior months can change.
4At the time of writing this March 2022 housing market report, the S&P Case Shiller Index has been released up through February 2022.
The comments provided herein are a general market overview and do not constitute investment advice, are not predictive of any future market performance, are not provided as a sales or advertising communication, and do not represent an offer to sell or a solicitation of an offer to buy any security.
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These views are current as of the date of this communication and are subject to rapid change as economic and market conditions dictate. Though these views may be informed by information from sources that we believe to be accurate and reliable, we can make no representation as to the accuracy of such sources nor the completeness of such information. Past performance is no indication of future performance. Investments in mortgage related assets are speculative and involve special risks, and there can be no assurance that investment objectives will be realized or that suitable investments may be identified. Many factors affect performance including changes in market conditions and interest rates and in response to other economic, political, or financial developments. An investor could lose all or a substantial portion of his or her investment. No investment process is free of risk and there is no guarantee that the investment process described herein will be profitable. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment.
Author: Gene Burinskiy | Vice President, Research & Data Journalism | The Amherst Group
Contributor: Thu Vo | Staff Financial Data Scientist | The Amherst Group