Black Knight: Lowest-Priced Homes See Greatest Appreciation
Black Knight, Jacksonville, Fla., said homes in the lowest-priced tiers have seen greatest price appreciation, putting pressure on lower-income buyers as affordability tightens.
The company’s monthly Mortgage Monitor said properties in the lowest 20 percent of home prices (Tier 1) have been the fastest-appreciating quintile for 67 consecutive months. Such Tier 1 properties have seen an annual rate of appreciation of 8.5 percent, nearly 2 percent higher than the market average and more than 3.6 percent above that of Tier 5 properties (those in the highest 20 percent of home prices).
“Given the disproportionate appreciation of low-priced homes as compared to income growth, affordability at the lower end of the market remains a challenge,” said Black Knight Data & Analytics Executive Vice President Ben Graboske. “Recent affordability reductions from higher rates could put more pressure on lower-income buyers by increasing competition for lower-priced homes, as borrowers’ overall buying power is diminished.”
Black Knight said 30-year fixed mortgage interest rates rose by 43 basis points in the first six weeks of 2018, pushing affordability to its lowest point since 2009. The Mortgage Bankers Association said since January, the 30-year fixed rate has increased by 39 basis points, from 4.25 percent to 4.64 percent. Graboske said these rate increases have put more pressure on a shrinking refinance market as well, cutting the population of potential refi candidates by 40 percent.
The report said larger overall increases in value among lower-priced homes is not just a recent trend, though; the same dynamic is observed when looking back over the past 15 years. While the nearly 50 percent increase in the median home price over that period has significantly outpaced the 40 percent growth in the median income, lower interest rates today have more than offset that difference. However, according to Census Bureau data, income growth in the lower quintiles has not kept up with the higher ends of the market.
“Overall affordability remains better than long-term historical averages, even taking the recent rate jump into consideration, Graboske said. “Currently, it takes 23 percent of the median income to purchase the median home nationally, which is still 1.9 percent below the averages seen from 1995-2003. But those in lower income levels are much closer–if not above–such long-term benchmarks. It seems evident that further affordability reductions from rising interest rates could put more pressure on lower-income buyers by increasing competition for lower priced homes, as borrowers’ overall buying power is diminished.”
Black Knight reported the total U.S. loan delinquency rate rose to 4.31% in January, an increase of 8.57% since December. The foreclosure pre-sale inventory rate rose to 0.66%, an increase of nearly 2 percent from December.
The report said states with the highest percentage of non-current loans were Mississippi, Louisiana, Florida, Alabama and West Virginia; states with lowest percentage were Idaho, Washington, Oregon, North Dakota and Colorado. States with highest percentage of seriously delinquent loans were Florida, Mississippi, Louisiana, Texas and Alabama.
