ICE Mortgage Monitor: "Annual home price growth cooled for the seventh consecutive month"

Here is the ICE November Mortgage Monitor report (pdf).

Press Release: ICE Mortgage Monitor: Record Levels of Tappable Equity, Fed Rate Cuts Could Spur Resurgence in Home Equity Withdrawals

• As of the end of Q3 2024, U.S. mortgage holders held $17.2T in equity, of which $11.2T is ‘tappable,’ meaning it can be borrowed against with the homeowner maintaining a 20% equity stake in their home 

• The average homeowner with a mortgage now has $319K of equity in their home, of which $207K is tappable

• Though Q3 withdrawals hit a two-year high – both collectively and individually among second lien products ($27B) and cash-out refinances ($21B) – the total represented just 0.42% of available tappable equity 

• Borrowers have been withdrawing equity at less than half the 10-year average 0.92% extraction rate, with second lien products 26% below typical levels and cash-outs 69% below the norm 

• The past 10 quarters have seen half the equity extraction to be expected in a ‘normal’ market, meaning $476B has gone untapped and not flowed back through the broader economy 

• In recent quarters, introductory rates on HELOCs have topped 9.5%, more than doubling the $167 March 2022 monthly interest-only payment needed for a $50K withdrawal to a high of $413 in January 2024 

• Recent Federal Reserve cuts to short-term interest rates – more directly tied to HELOC than 30-year mortgage offerings – have already made equity withdrawals modestly more affordable and attractive 

• If both market expectations for an additional ~1.5 pp in additional Fed cuts and current spreads hold true, we could see HELOC rate offerings in the low 7% range by the end of 2025 

• That would drop the monthly payment needed to withdraw $50K in equity back down below $300; still notably higher than the historical average, but more than 25% below recent highs

  emphasis added

Mortgage Delinquencies Increased in September

Here is a graph on delinquencies from ICE. Overall delinquencies increased in September but are below the pre-pandemic levels. Source: ICE McDash

• The national delinquency rate rose 14 basis points (bps) to 3.48% in September, up 4.3% for the month and 5.7% year over year ‒ the fourth consecutive monthly increase

• Serious delinquencies (loans 90+ days past due but not in active foreclosure) rose 26K (+5.9%) to their highest level since May 2023, up +4.6% year over year

• The number of borrowers a single payment past due climbed 42K to a three-month high, while 60-day delinquencies rose by 12K to their highest level since January 2021

• Inflows of newly past-due loans and rolls to later stages of delinquency increased across the board, as cures fell by 11% overall with declines in both early- and late-stage cures

Early-Stage Delinquencies Increasing

One of the key metrics to watch for mortgage stress is early-stage delinquencies. These are borrowers that are delinquent within 6 months of origination. This was one of the obvious warning signs during the housing bubble.

There has been a steady increase in early-stage delinquencies for VA loans.

• Early-stage delinquencies – borrowers already past due six months after origination – have been gradually rising as well, most notably among VA originations

• Overall, 1.7% of 2024 vintage originations have been delinquent six months after origination, the highest share for any vintage since 2008 – outside of pandemic-era payment shocks

Note that national mortgage performance is being impacted by the hurricanes.

• Along with credit related drivers, physical damages and financial fallout from recent hurricanes are also impacting homeowners’ ability to make their housing payments

• 4.9 million mortgage holders, carrying a combined $1 trillion in unpaid principal balances (UPB) on their homes, were either in the path of hurricanes Helene and Milton or in areas that sustained flooding in their wake, with an unlucky 429K finding themselves in the path of both storms

• Very early impacts from Hurricane Helene can already be seen in September mortgage performance, with an estimated 3.5K mortgage holders already past due as a result of the storm

• The heaviest impacts are likely to manifest in borrowers’ ability to make October and November payments, given that the storms made landfall in late September

“Annual home price growth cooled for the seventh consecutive month”

Here is the year-over-year in house prices according to the ICE Home Price Index (HPI). The ICE HPI is a repeat sales index. ICE reports the median price change of the repeat sales. The index was up 2.9% year-over-year in September, down from 3.0% YoY in August.

Source: ICE Home Price Index (HPI)

• Annual home price growth cooled for the seventh consecutive month to +2.9% in September, from a revised +3.0% in August and +6.2% back in February

• On a seasonally adjusted basis, prices rose by 0.14% in the month (equivalent to a seasonally adjusted annualized rate (SAAR) of 1.72%), a modest uptick from August

• While the market remains cool, annual home price growth rates – which have been slowing since February – could flatten, or even tick up slightly, over the final three months of the year

• Softer price growth late in 2023 – when mortgage rates climbed above 7.5% – provide a lower starting point for year-over-year comparisons, which will give a modest boost to annual growth rates in Q4 2024, despite current monthly gains running below their backward-looking 12-month average

There is much more in the mortgage monitor.