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Black Knight Mortgage Monitor: Record Low Delinquencies, "Home Affordability Nears All-Time Low"
House Prices up 19.9% Year-over-year in March
Black Knight publishes a monthly Mortgage Monitor report that contains interesting information on the mortgage market and housing.
Today, the Data & Analytics division of Black Knight, Inc. released its latest Mortgage Monitor Report, based upon the company's industry-leading mortgage, real estate and public records datasets. As home prices and interest rates continue their sharp upward climb, this month’s report revisits the mounting affordability pressures resulting from these competing dynamics. According to Black Knight Data & Analytics President Ben Graboske, though home price appreciation slowed in March – albeit very slightly – 30-year mortgage interest rates above 5% have pushed affordability very near its all-time worst level.
“After accelerating for the last four months, the rate of annual home price growth actually slowed a bit in March,” said Graboske. “Still, at 19.9% – down from an upwardly revised 20.1% in February – March would have otherwise set yet another record for appreciation. Year-to-date, home prices are already up nearly 6% nationwide with nearly 25% of the nation’s largest markets seeing gains of more than 7% over the last three months alone. With 30-year interest rates hitting 5.11% as of April 21, the impact these price gains have had on home affordability is significant.
“As measured by the share of median income required to make the P&I payment on the average-priced home bought with 20% down, U.S. housing was the least affordable ever back in July 2006 when it took 34.1% to make that P&I payment. At the end of February 2022, we were already at 29.1% – and both rates and prices have continued to climb since then. As of April 21, that payment-to-income ratio has now climbed all the way to 32.5%, within just 1.6 percentage points of the prior record. In ‘kitchen table’ terms, that equates to a $522 higher average monthly P&I payment – a 38% increase since January – with that payment up $790 (+72%) since the start of the pandemic. It won’t take much to push us past 2006 levels either; a 50 basis points jump in 30-year offerings or a 5% rise in home prices would push affordability to its worst level on record. And saying that, we should also keep in mind that they’ve already risen 200 basis points and 5.9% respectively this year.”
Mortgage Delinquencies at Record Lows
Here is a graph on delinquencies from Black Knight. Overall delinquencies are at record lows.
• The national delinquency rate fell to 2.84% in March, shattering the previous record of 3.22% set in January 2020
• Mortgage delinquencies fell 15.5% from February, compared with an average March drop of 10% over the last 20 years
• Robust employment, continued student loan deferrals, strong post-forbearance
performance and millions of refinances into record low interest rates are all helping to put downward pressure on delinquencies
House Price Growth was Strong in March
The second graph shows Black Knight’s estimate of monthly house price increases and the year-over-year change in prices. Price increases so far in 2022 have been extremely high.
• Home price growth slowed slightly in March after accelerating in each of the previous four months
• Still, at 19.9% – down from February's upwardly revised 20.1%, the first ever month to see >20% price growth – March would have otherwise set yet another a record for appreciation
• The average home value increased 2.3% in March, marking the fifth time since the pandemic onset where home prices increased by more than 2% in a single month
• Prices are now up 5.9% over the first three months of 2022
National Payment to Income Ratio
Note: Black Knights data on affordability goes back to 1996. This doesn’t include housing in the 1980 period when 30-year mortgage rates peaked at over 18%.
And on the payment to income ratio:
• The least affordable American housing has ever been was back in July 2006, when it took 34.1% of median income to make the monthly P&I payment on the average-priced home bought with 20% down
• As of April 21, that payment-to-income ratio has now climbed all the way to 32.5%, within just 1.6 points of the prior record
• A rise of just 50 more basis points (BPS) in rates or a 5% rise in home prices, would push affordability to its worst level on record, and they are already up 200 BPS and 5.9% respectively since the start of 2022
• 37 markets – representing nearly a third of the country – are now the least affordable they’ve ever been
As Black Knight has noted, there were “affordability products” with low teaser rates available during the housing bubble. Excluding the bubble years, this is the worst affordability since at least the early ‘90s, maybe ‘80s.
There is much more in the mortgage monitor. For example, Black Knight also has data on Adjustable-Rate Mortgage (ARM) usage (increasing, but not concerning) and on the status of mortgage loans that were in forbearance.
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