
Black Knight: Home Price Growth Slowing
For the third time in a week, a report suggests the rate of home price growth is slowing.
Black Knight, Jacksonville, Fla., reported home price appreciation slowed each month from March through May, the first three-month slide in nearly four years. The company’s monthly Mortgage Monitor report noted though every state saw prices increase in May–typically one of the strongest months for home price appreciation–the average home gained just 0.93 percent in value, the lowest growth rate for any May in the past four years
The report noted two-thirds of both states and large metropolitan areas have seen slowdowns in rates of home price appreciation. Thirty-two states have seen price gains slow, while 18 have picked up speed, with California seeing three times the national average deceleration.
All that said, the annual rate of home price growth is still historically high at 6.3 percent, some 2.5 percentage points above long-term norms, said Black Knight Executive Vice President for Data and Analytics Ben Graboske.
“For more than six years, we’ve been riding a wave of home price appreciation above the 25-year average,” Graboske said. “The question now is whether tightening affordability will end that streak and if more deceleration is on the horizon.”
The report said recent cooling of home price gains and slight reprieve in rising interest rates have combined to stabilize affordability in recent months. Black Knight said as rates have ticked down from 4.66 percent in late May to 4.52 percent in mid-July, the monthly principal and interest payment to purchase the average home has only increased by $4 per month, compared to the $138-per-month increase seen over the first five months of 2018.
“Still, the $1,213 in principal and interest per month needed to buy the average home remains near a post-recession high,” Graboske said. “While that represents a nearly $500 per month increase from the bottom of the market in 2012, it’s important to keep in mind that it’s still roughly 13 percent less than was required back in 2006.”
The report also looked at how rising short-term interest rates have affected holders of outstanding adjustable-rate mortgages, finding that 1.7 million such borrowers have seen their monthly mortgage payments increase by an average of $70 over the past 12 months.
“This subset of borrowers had been the beneficiary of downward reductions in their rates and payments following the financial crisis, but that’s no longer the case,” Graboske said. “Increases to both the LIBOR and constant maturity Treasury rates have resulted in the average rate on a post-reset ARM rising by more than .5 percent over the past 12 months and nearly .75 percent over the past two years, pushing the average post-reset ARM interest rate to more than 4.5 percent.”
Graboske added while this has not led to any measurable increase in post-reset ARM delinquencies, ARM loans are now prepaying at a 70 percent higher rate than their fixed-rate counterparts over the past 12 months. “This is a trend that may continue as an estimated one million borrowers would face an additional payment increase upon their next reset if index values were to hold steady at today’s rates,” he said.
Other report data:
–Total U.S. loan delinquency rate: 3.74 percent, an increase of 2.71 percent from the previous month.
–Total U.S. foreclosure pre-sale inventory rate: 0.56, an increase of 4.51 percent fro the previous month.
–States with highest percentage of non-current loans: Mississippi, Louisiana, Alabama, West Virginia and Maine.
–States with lowest percentage of non-current loans: Colorado, Oregon, Washington, Idaho and North Dakota.
–States with highest percentage of seriously delinquent loans: Mississippi, Florida, Louisiana, Alabama and Arkansas.