Black Knight, CoreLogic Tell Different Home Appreciation Stories

Black Knight, Jacksonville, Fla., said home prices rose by just 1 percent in March, bringing annual appreciation to just 3.8 percent, the first time since 2012 that home prices have fallen below the 25-year average of 3.9 percent.

In a separate report, CoreLogic, Irvine, Calif., came to a different conclusion. It said its Home Price Index showed home prices rose by 3.6% in April from a year ago, the first acceleration since March 2018. On a month-over-month basis, prices increased by 1%.

Black Knight said its report showed that March–a month that typically sees the largest home price gains of the year–prices rose by just 1%, marking 13 consecutive months of home price deceleration. Its data show home prices began to decelerate in February 2018 as rising interest rates put pressure on affordability, intensifying toward the end of the year as 30-year fixed rates peaked near 5% in November.

This deceleration, said Black Knight Data & Analytics Division President Ben Graboske, has resulted in stronger affordability. As of May, the monthly payment required to purchase the average-priced house with 20% down is $1,173, the lowest such payment in more than a year. Likewise, the 22% of median income required to purchase the average-priced house is the lowest payment-to-income ratio in more than a year, well below the long-term (1995-2003) average of 25%.
“Falling rates have already had a positive impact on affordability,” Graboske said. “That the market reacted in terms of slowing home price growth even before we hit that long-term average suggests that a 25% payment-to-income ratio may not be sustainable in today’s market, whether due to excess non-mortgage related debt, lending standards or other factors.”

Black Knight said of the 100 largest U.S. housing markets, 85 have seen their growth rate decrease over the past 12 months. Slowing continues to be strongest in the western U.S., with the most acute deceleration along the western coast of California and in Seattle, Wash. California’s rate of appreciation has slowed by 8% (an 84% reduction) from 9.6% one year ago to just 1.6% as of March. San Jose, Seattle and San Francisco have all seen annual home price growth rates declining by more than 10 percentage points (-30%, -13%, and -12%) respectively. The median home price in San Jose is now down 6% from last year following three consecutive months of negative year-over-year movement; this comes after having seen double-digit growth for much of the past few years.

Meanwhile, CoreLogic said home prices increased nationally by 3.6% from a year ago. On a month-over-month basis, prices increased by 1% in April.

“The pickup in sales between March and April, has helped to counter the recent slowing in annual home-price growth,” said CoreLogic Chief Econmist Frank Nothaft. “Mortgage rates are 0.6 percentage points below what they were one year ago and incomes are up, which has improved affordability for buyers. However, price growth has remained the highest for lower-priced homes, constraining housing choices for first-time buyers.”

According to the CoreLogic Market Condition Indicators, 37% of metropolitan areas have an overvalued housing market as of April. Twenty-six percent of the top 100 metropolitan areas were undervalued, and 37% were at value. When looking at only the top 50 markets based on housing stock, 42% were overvalued, 16% were undervalued and 42% were at value.

Looking ahead, CoreLogic said after several months of moderation in early 2019, home prices should begin to pick up and increase by 4.7% through April 2020. On a month-over-month basis, home prices are expected to decrease by 0.3% from April to May.