Black Knight: Affordability Outlook Improves As Prices Slow

Black Knight, Jacksonville, Fla., said annual home price appreciation slowed in December for the 10th consecutive month in December, from a high of 6.8 percent annual growth last February to 4.6 percent at the end of the year.

The company’s monthly Mortgage Monitor Report said on a monthly basis, the average home price declined by 0.3 percent in December, bringing the average home price down a combined -0.82 percent (-$2,440) over the past four months.

Black Knight President of Data & Analytics Ben Graboske said the decline has been enough to increase consumers’ buying power by more than 6 percent while keeping monthly payments the same, or reducing the monthly payment on the average-priced home purchase by $62.

“While home prices are still up year-over-year in all 50 states and the nation’s 100 largest markets, slowing is noticeable nationwide and–combined with recent interest rate reductions–is helping to improve the overall affordability outlook,” Graboske said.

That said, Graboske noted annual growth is still outpacing the 25-year average of 3.9 percent, although the gap is closing quickly. “Also, it’s yet to be seen what impact the recent pullback in interest rates may have on the national home price growth rate,” he said.

The report said as a result of slowing, it now takes 22.2 percent of the median household income to make monthly principal and interest payments on the average-priced home purchase using a 20 percent down, 30-year fixed-rate mortgage, down from a post-recession high of 23.4 percent last year and well below the long-term average of 25 percent seen in the late 1990s and early 2000s.

“While this is all welcome news for consumers heading into the spring home buying season, it remains to be seen whether recent rate declines and easing affordability will be enough to halt the deceleration in home price growth,” Graboske said.

The report said deceleration in HPA was most acute on the West Coast, particularly Washington and California, which saw annual rate of appreciation fall from over 10 percent in February 2018 to just 3 percent as of the end of 2018. The slowdown has been most apparent in San Jose, Seattle and San Francisco, which have gone from being ranked first, third and fourth by annual HPA, respectively, to all three being in the bottom 25 percent of markets within the past 10 months. After seeing annual HPA rates above 20 percent in 2017, prices in San Jose are now nearly flat from where they were one year ago. Home prices in San Francisco are up just 1.9 percent, while in Seattle home prices are up 3.1 percent from one year ago, whereas both metro areas had until recently been experiencing double-digit growth.