VIDEO: AEI Housing Market Indicators, May 2025

AEI Housing Market Indicators May 2025 Briefing

You don’t want to miss this update! This month, we highlighted the following hot housing topics:

• Recent movements in rates, demand, and supply: Mortgage rates remained elevated at 6.75%, while purchase rate lock volume dropped to a multi-year low—down 24% from the same week in 2019 and 5% year-over-year.
• Home price appreciation (HPA) and months’ supply trends through March 2025: HPA slowed to 3.0%—its second lowest April rate in the series—while months’ supply declined to 3.2 months, just below pre-pandemic levels as inventory grows faster than seasonal trends
• FHA appears not to be properly tracking its partial claims, costing taxpayers: FHA is not and collecting partial claims in about a quarter of cases, and taxpayers will be providing free money to certain FHA borrowers. Assuming an average partial claim amount of $23,000-$27,000 and 1.3 million unique claims since 2020, the taxpayer could lose $6.75 billion—not including partial claims completed before 2020.
• An update on Bureau of Land Management sales to build starter homes: Making just 250 sq. miles of developable BLM land available for sale in 12 Western states would enable the private sector to add 1.75 million homes, a much of which would be family-sized starter homes for the working class. The 2025 Budget Reconciliation process provides an opportunity to address the Western region’s housing and development needs by expediting the disposal of target Federal lands for competitive sale at market prices.
• Preview: The AEI Housing Success Playbook: The AEI Housing Center’s Housing Success Playbook provides five straightforward, proven policies to build an additional 1.6 million homes annually, and without subsidies. These include allowing smaller lots in new subdivisions, legalizing conversions of single-family homes, permitting backyard cottages and ADUs, enabling residential overlays in commercial zones, and developing starter homes on BLM land.
• The surprising role of large developers in solving the housing crunch: The nation’s largest home builders have engineered a dramatic shift toward serving first-time homebuyers, with 51.2% of their new construction sales going to FTBs in 2024, up from 38.6% in 2014. This transformation has been driven by building smaller homes and offering financial tools like rate buydowns, while median lot sizes declined by 1,050 sq. ft., enabling greater affordability and access to starter homes.

The AEI Housing Market Indicators (HMI) provide accurate and timely metrics for the housing market. These include mortgage risk/leverage (with a particular focus on agency first-time buyer volume and risk), house prices and appreciation trends, housing sales (new and existing sales whether institutionally financed, cash, or other-financed), and inventory levels. Since the housing market is influenced by many different factors, all need to be considered together to better understand market trends.

WATCH: AEI Housing Market Indicators May 2025 Briefing

Monthly Update of the AEI Housing Market Indicators: Download this month’s slides

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