Housing Market Update: 2021 Year in Review

2021 was nothing short of spectacular for U.S. home values. However, the market remains challenging for first-time buyers—competition is fierce, supply is low, and entry-level options are more limited than ever before. Is there any relief on the horizon for buyers in 2022? Red Bell's Steve Gaenzler, SVP, Products, Data & Analytics, joins Brenda Smucker, Radian's VP, Learning & Development to discuss the latest insights from the Radian Home Price Index, provided by Red Bell Real Estate, LLC.
 
 In this podcast, we will explore:

• An overview of Red Bell’s Radian Home Price Index (HPI)
• A deep dive into Radian HPI data for 2021, including national, regional, and metro-area level trends
• The impact of home price appreciation for first-time homebuyers
• Trends and expectations for the housing market in 2022

radian.com/HPI

2021 U.S. Home Prices: Records Far and Wide Reveals Radian Home Price Index

This communication is intended to convey general information only and not to provide any legal or accounting advice or opinions. An attorney or accountant should be consulted for specific information. Radian Group Inc. and its parents, subsidiaries and affiliates make no express or implied warranty respecting the information presented and assume no responsibility for errors or omissions.  

Services provided by Red Bell Real Estate, LLC, a wholly owned subsidiary of homegenius Inc. 7730 South Union Park Avenue, Suite 400, Midvale, UT 84047. Tel: 1-866-626-2381. Red Bell Real Estate, LLC and its wholly owned subsidiaries are licensed in every state and the District of Columbia. This communication is provided for use by business professionals only and is not intended for distribution to consumers or other third parties. This does not constitute an advertisement as defined by Section 1026.2(a)(2)of Regulation Z. 

Transcript

Brenda: Welcome to Radian's real estate market year in review for 2021. I’m Brenda Smucker, Vice President of Learning and Development. Today we are welcoming back Steve Gaenzler, Red Bell’s Senior Vice President of Products, Data and Analytics. Steve, we last checked in with you in August for a mid-year update on the housing market. I am excited to have you back today to talk about the full picture of 2021. 

Steve: Thanks Brenda, it’s good to be back. I always enjoy coming onto the podcast to share a market update. 

Brenda:  Before we jump in, let’s give our listeners a quick refresher on the Radian Home Price Index. Can you tell us what it is, and why it is a valuable tool for understanding real estate markets?

Steve: No problem, Brenda. That’s a good place to start. The Radian Home Price Index—which is provided by Radian's subsidiary, Red Bell Real Estate—is a better way to monitor and track changes in real estate markets around the country as compared to legacy indices: 

·         First, other indices are not timely enough to be of true value to users, maybe other than researchers. In fast moving markets like housing, you need insights fast and the Radian Home Price Index is available just 15 days after month end as compared to weeks-to-months for most other indices.

·         Second, the Radian Home Price Index leverages machine learning and artificial intelligence to provide more robust estimates of the entire US housing stock, not just repeated sales or samples, but the whole nation.  

·         Finally and most valuable,  the Radian Home Price Index offers micro-market indices that combine property attributes like bedrooms or square footage with granular geography like zip codes and neighborhoods. Other indices don’t provide that level of granularity, making the Radian Home Price Index  more insightful.  

 Brenda: Thanks for the overview, Steve. It’s very exciting that we have a chance to talk about 2021 data before most other indices have even reported on it. Can you take us through the high-level snapshot of the 2021 real estate market?

Steve: Yes, it is very cool that we can talk about this data before anyone else. The short story is that 2021 was spectacular for U.S. home values. Many of the national records that were set in 2020 were shattered again in 2021 according to HPI data : 

·         Highest Average Sales Price—$457,000 in 2021 vs. $381,000 in 2020

·         Median Estimated Price—$307,000 in 2021 vs. $268,000 in 2020

·         Shortest Days on Market to Sale—75 days in 2021 vs. 93 in 2020

·         Number of Closed Sales—3.77 million in 2021 vs. 3.10 million in 2020

·         Average Active Monthly Listings—920,000 in 2021 vs. 1.16 million in 2020 

Brenda: Wow, those are some incredible numbers. What are some of the trends you are seeing at the more local level? Are there any interesting markets to watch?

Steve: Yes, there are some interesting trends when you zoom in on regional and metro areas. All six regions across the country recorded stronger home price appreciation in 2021 than in 2020.

·         The South was the strongest performing region in 2021, with 16.9 percent annual appreciation, which is nearly double the 8.5 percent appreciation recorded for the South in 2020. 

·         The Midwest which was the strongest performing region of 2020, became the so-called “worst” performer relative to the prior year, recording a 12.1 percent home price appreciation rate, which was still an increase of  33 percent above the full year rate of 9.1 percent in 2020.

·         The MidAtlantic region recorded the slowest annual appreciation rate amongst the regions at +11.3 percent.

At the metro level, all but one of the 20 largest metro areas of the U.S recorded faster annual appreciation in 2021 compared to 2020. 

·         Minneapolis was the only one of the 20 largest metros to lag behind 2020 appreciation rates in 2021. 

·         Seattle, WA, Phoenix, AZ, and Tampa, FL recorded price appreciation rates above than the national average.

·         The remaining large metros recorded appreciation slightly below the national average

Brenda: Interesting, the Midwest didn’t follow the same booming trend from 2020.    So, I love hearing about all these numbers, but what does that information mean? What story does the Radian Home Price Index data tell for 2021?

Steve: Well, it’s a great story for homeowners who continue to enjoy the benefits of home price appreciation. The median owner saw an estimated increase of more than $38,000 in their home value, creating trillions of dollars in potential borrower equity. However, it is a more troubling story for many would-be buyers who have struggled to keep up with rising prices and competition. The supply and demand imbalance continues to drive prices up—the Radian HPI tracked a 14.2 percent year-over-year increase in home prices from December 2020 to December 2021. 

One year ago, the housing supply shortage was dire. Since then, it has only gotten worse. 2021 recorded both historic low average monthly listing counts (supply) and record high sales volume (demand). In 2021, Radian HPI recorded more than 3.7 million closed transactions, the highest ever recorded—beating the record of 3.6 million set in 2020. 

Unfortunately for buyers, the supply of homes has collapsed at the same time we are seeing record-breaking sales. In fact, in December 2021, the number of actively listed homes for sale was at the lowest level ever recorded. December’s inventory was more than 15 percent below December 2020 and 40 percent below the average of the winter months, November-February.

Brenda: I’ve heard you say it before, but it always hits home, that supply and demand imbalance must be making it very difficult for homebuyers.

 Steve: Absolutely, the market has been incredibly difficult for buyers, especially first-time home buyers who don’t have the opportunity to financially benefit from price appreciation. The median estimated home price has risen to $307,022, more than a $38,000 increase from 2020. Competition is fierce, supply is low, entry-level options are more limited than ever before, and for the first time, more than one-quarter of homes sold for $500,000 or more. 

 In December 2021, 28 percent of all homes sales were over $500,000. Just two years earlier, those homes accounted for only 16 percent of all sales. Meanwhile, lower priced homes below $250,000, accounted for 18 percent of all sales two years ago but represented only 11 percent of sales in December. More affluent borrowers are pushing out homeowners who may have been more financially impacted by the pandemic.

 Brenda: Steve, I am sure my next question won’t be a surprise to you. What are your expectations for 2022? Is there any relief in sight for those homebuyers struggling to enter the market?

 Steve: Well, yes and no. There may be less competition for homes, which means fewer bidding wars and price escalations. However, higher mortgage rates will also have an adverse impact on affordability.

·         While overall housing inventory is expected to remain low in 2022, there are some indications that supply will increase compared to 2021. According to the Commerce Department, housing starts increased 1.4 percent from November to December.

·         Mortgage rates are expected to increase over the course of 2022, which will likely reduce the demand to purchase homes. The Mortgage Bankers Association reported an 11 percent decline in purchase activity the week of January 21 compared to the same week one year ago.

·         Although rising rates may help ease the competition for limited supply, it will cost buyers more. As of January 26th, the 30-year fixed rate was 77 basis points higher than it was a year ago.

·         I will add, however, that the Biden administration has proposed a number of policies to address the issue of affordability, including subsidies to develop affordable housing units, a first-time homebuyer credit, downpayment assistance for first-generation homebuyers, and potential challenges to zoning laws. If implemented, these could help the situation for first-time home buyers.

Brenda: I am sure most of us will be keeping an eye on those policy updates.  Steve, thank you for sharing the Radian HPI data and your insights on the 2021 housing market. For our listeners that want to learn more, you can see the latest Radian Home Price Index news release on the Radian website, or visit radian.com/hpi to access more resources. Steve, we will check in with you this summer for a mid-year update!

Steve: Thank you Brenda, it's a pleasure talking with you. I’ll be back to share more later this year !

This communication is intended to convey general information only and not to provide any legal or accounting advice or opinions. An attorney or accountant should be consulted for specific information.  Radian Group Inc. and its parents, subsidiaries and affiliates make no express or implied warranty respecting the information presented and assume no responsibility for errors or omissions.  
 
Services provided by Red Bell Real Estate, LLC, a wholly owned subsidiary of homegenius Inc. 7730 South Union Park Avenue, Suite 400, Midvale, UT 84047. Tel: 1-866-626-2381. Red Bell Real Estate, LLC and its wholly owned subsidiaries are licensed in every state and the District of Columbia. This communication is provided for use by business professionals only and is not intended for distribution to consumers or other third parties. This does not constitute an advertisement as defined by Section 1026.2(a)(2) of Regulation Z.