Construction bottlenecks and tight for-sale inventories amid high demand led December home prices to appreciate by 17.2% year-over-year (YoY), according to The Amherst Home Price Appreciation Index (HPA). This marks the sixth consecutive month of slowing price appreciation since the index’s all-time high of 20.0% in June 2021. By contrast, the tight ownership market and unwavering demand for suburban single-family homes caused rent growth to climb to 10.1% YoY, according to the Amherst Rent Growth Index. Although December marked a historic high in rent growth since the index started in 2011, growth remains consistent with its upward-trend as demand for rentals continues to outpace supply.
Amherst Home Price Appreciation Index
Strong home price appreciation has become more widespread across the United States as sub-10% growth becomes rarer in tracked markets. The market-level HPA indicates Florida again contains four of the five fastest-appreciating markets, with YoY growth ranging from 31.2% in Cape Coral to 42.0% in Naples. Phoenix, Arizona, rounds out the top five with the third fastest-growing market (33.3% YoY growth). Home price growth remains strongest in the Southeast and non-coastal western markets. We believe the persistence of price drivers, such as low for-sale inventories, pandemic-induced difficulties in sourcing workers and materials, and high consumer demand, suggests prices will likely continue growing well into 2022.
Amherst Rent Growth Index
Enduring consumer demand for single-family rentals led rents to grow by 10.1% YoY in December. Though this marks the first venture into the 10% range since the index began, it is only 2bps higher than it was in November. The five fastest-growing markets remain in Florida, ranging from Tampa’s 22.3% to Cape Coral’s 26.7% YoY December growth. As with home prices, rent growth is strongest in the Southeast and non-coastal western markets. Continued demand by families for homes outside dense, urban areas in already underbuilt markets suggests rents will continue growing at least through early 2022.
The Amherst Home Price Index (HPA) tracks home price changes in the 20 Metropolitan Statistical Areas¹ (MSAs) that are used to construct the S&P Case Shiller 20-city Index as well as 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 Case Shiller Weiss, Corelogic, and the Federal Housing Finance Agency (FHFA), 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 indices².
The Amherst Rent Growth Index tracks rent price changes of Single-Family Detached (SFD) homes in the 20 Metropolitan Statistical Areas (MSAs) that are used to construct the S&P Case Shiller Index as well as 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 HPI. The index incorporates both MLS and Altos Research rental data to produce a timely rent index.
Due to the early nature of our estimates, our index estimates for prior months can change in future publications.
¹Atlanta, Boston, Charlotte, Chicago, Cleveland, Dallas, Denver, Detroit, Las Vegas, Los Angeles, Miami, Minneapolis, New York, Phoenix, Portland, San Diego, San Francisco, Seattle, Tampa, and Washington, D.C.
²At the time of writing this December 2022 housing market report, the S&P Case Shiller Index has been released up through November 2021.
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.
The Amherst Group of companies comprise of leading real estate investment and advisory firms with a mission to transform the way real estate is owned, financed and managed. Amherst leverages its proprietary data, analytics, technology, and decades of experience to seek solutions for a fragmented, slow-to-evolve real estate ecosystem and to materially improve the experience for residents, buyers, sellers, communities, and investors. Today Amherst has over 900 employees and more than $10.9 billion in assets under management*.
Over the past decade, Amherst has scaled its platform to become one of the largest operators of single-family assets and has acquired, renovated, and leased more than 40,000 homes across 28 markets in the U.S. The firm delivers customized, stabilized cash-flowing portfolios of assets to its investors, wrapped in all the ongoing services required to manage, own, and finance the asset including property management, portfolio management, and a full capital markets team. In addition to its single-family rental platform, Amherst’s debt business pursues two distinct credit strategies in mortgage-backed securities and commercial real estate lending. Over its 25-year history, Amherst has developed a deep bench of research and technology talent, and leverages data and analytics at every stage in the asset lifecycle to improve operations and preserve long-term value for our investors and the more than 165,000 residents the firm has served.
*As of June 30, 2021
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Author: Gene Burinskiy | Senior Associate, Research & Analytics | The Amherst Group
Contributor: Thu Vo | Staff Financial Data Scientist | The Amherst Group