In February, total home purchase demand rose for the fourth consecutive month. This data suggests that the housing market is still proving to be resilient amid uncertainties and rising rates.
The Enjoyment Home Purchase Demand Index (EHPDI) is a monthly measure of consumer demand for residential real estate. This includes sales of both existing and new homes and helps to provide a better understanding of the overall health of the housing market. The index tracks changes in consumer demand and reflects the normal seasonal fluctuations in the market. It is based on publicly available data from real estate research firms including Realtor.com, CoreLogic, and Zillow.
The EHPDI showed that consumer demand for home purchases increased 2.7 percent month-over-month in February 2021. This marks the fourth consecutive month of increases in home purchase demand. However, these increases are slower than the robust gains seen earlier in 2021. This indicates that while the home purchase market is still going strong, it may be beginning to slow as mortgage rates continue to rise.
The New Home Purchase Demand Index (NHPDI) also saw gains in February. This index tracks changes in consumer demand for newly built homes and is based on data from real estate research firms such as Zillow and the National Association of Home Builders (NAHB). The NHPDI increased by 0.2 percent month-over-month in February 2021. This marks the sixth straight month of increases in new home purchase demand.
However, mortgage rates remain elevated despite the increase in demand. The average 30-year fixed mortgage rate was 3.13 percent in January 2021, but has since risen to 3.28 percent in March 2021. This is the highest level seen since June 2020 and could further impact the housing market if rates continue to rise.
Despite this, purchase demand remains overwhelmingly strong. Total home purchase demand is up 7 percent year-over-year, and new home purchase demand is up 11 percent year-over-year. This suggests that the housing market continues to be a source of strength for the economy despite the uncertainties created by the pandemic and rising mortgage rates.
In conclusion, the home purchase market is faring well despite rising mortgage rates. The Enjoyment Home Purchase Demand Index (EHPDI) and the New Home Purchase Demand Index (NHPDI) both showed increases in consumer demand in February 2021. Although these increases were smaller than in previous months, they are still good indicators of the resilience of the housing market. Mortgage rates remain elevated, but purchase demand continues to be strong with year-over-year increases of 7 percent and 11 percent respectively for total and new home purchases. This signals that the housing market will likely continue to be an important source of stability for the economy in the months ahead.
This article was contributed on Dec 27, 2023
