Home Price Appreciation and Rent Growth Refuse to Hit the Brakes

Demand for single-family homes was resiliently high in April 2022 despite other markers for the economy’s health showing signs of deceleration. The S&P 500 was down more than 13% since its peak in December 2021 and inflation has consistently been over 8% the past three months, despite raised interest rates. However, economic shifts have not yet dampened American consumer demand for single-family homes, as demonstrated by Amherst Home Price Appreciation Index (“HPA”) and Amherst Rent Growth Index, as well as sales and leasing velocities.

The HPA shows single-family home prices grew 19.3% year-over-year (YoY) in April 2022 while the Amherst Single-Family Rent Growth index, which tracks all single-family homes for lease, peaked, reaching 11% YoY in April 2022.

Thirty-day home sale velocity rates are still 16%, lower than the historic peak of 18.5% in early 2022, but still higher than any week in 2021. Single-family listings are also down more than 10% year-over-year in April and down more than 40% since 2019. In fact, Amherst believes one of the only signals of a cooling housing market are April mortgage applications which were closer to their 2019 than 2021 levels.

Demand to lease single-family homes is also still robust. With an average 30-day velocity of 59% in April 2022, for-lease single-family homes also flew off the market at rates comparable to the peaks of 2021.

The Amherst Home Price Appreciation Index

The demand patterns that have prevailed throughout the pandemic have remained remarkably persistent. The HPA suggests homes in suburban and traditionally more affordable metropolitan areas are still appreciating at the fastest rates. With 12 of the 20 fastest growing areas, Florida remains the hottest state. The growth is staggering, with Sebastian, FL and Naples, FL appreciating 52% and 51% YoY in April, respectively. North Port, FL came in at third but with a substantially lower growth of 40% YoY.  With an average sale price of $680,000, these three CBSAs suggest Florida’s growth stems from being the destination for wealthy Americans. The remaining markets grew between 30% and 37%. Breaking up Florida’s domination of the top 20 are cities in suburban and smaller, less expensive cities in Montana, Tennessee, North Carolina, Arizona, Texas, South Carolina, and California.

The Amherst Rent Growth Index

According to the Amherst Rent Growth Index, twelve of the top 20 markets with the fastest growing single-family rents are also in Florida, where Miami, North Port, Punta Gorda, and Cape Coral locked in rent growth in a tight range of 25%-28% YoY in April 2022. The remaining 15 markets grew between 16% and 21%. Fast growing markets that are not in Florida include ones in Tennessee, Pennsylvania, California, Delaware, and Georgia.

Although home price and rent growth have so far defied expectations because more and more households try to lock in reasonable mortgage rates, Amherst believes it is wise to anticipate a price growth slow down coming soon.  Consumer spending continues to rise, yet U.S. Bureau of Labor and Bureau of Economic Analysis Statistics suggest that consumers are starting to reach into their savings, implying that inflation is starting to eat into wage growth.¹ Furthermore, looming expectations of further interest rate hikes by the Federal Reserve Bank portend more growth in mortgage rates.² We will be watching closely in the weeks to come as the climate starts to show signs of greater volatility ahead.

¹As indicated by the BLS Personal Saving Rate for April, 2022, which fell to 4.4%, its lowest value since 2009 and by the BEA Personal Consumption Expenditures (PCE) and Personal Income (PI) indexes, whereby PCE increased more rapidly in April.
²Tim Smart. Fed Raises interest Rates by Half a Percent in Aggressive Move to Fight Inflation. US News. May 4, 2022.

Data Details

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.³

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.

³At the time of writing this April 2022 housing market report, the S&P Case Shiller Index has been released up through March 2022.

Important Disclosures

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.
Similarly, this information is not intended to provide specific advice, recommendations or projected returns of any particular product of The Amherst Group LLC (“Amherst”) or its subsidiaries and affiliates.
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