Black Knight Inc. has released its August 2023 Mortgage Monitor Report, looking again at the reheating housing market nationwide, with home prices hitting new peaks at the national as well as local levels, and no end in sight to the constrictive lack of for-sale inventory driving the increases.
“We’ve been noting for some months that the recent rate of home price gains would have a lagging, but significant, impact on the annual rate of appreciation,” says Andy Walden, vice president of enterprise research, Black Knight. “Well, June marked that inflection point. Not only has the Black Knight HPI reached a new record high but 60% of major markets have done so as well.
“Rising home prices have boosted homeowner equity levels as well, which had been retreating from their 2022 highs not very long ago. In fact, despite total outstanding mortgage debt topping $13 trillion for the first time in history, much of the decline in equity we’d tracked since last year’s peak has since been recovered.
“Overall mortgage-holder equity is now back above $16 trillion, with some $10.5 trillion of that being ‘tappable.’ The average mortgage holder has some $199,000 in tappable equity available to them; down somewhat from 2022’s historic highs but still a historically large amount.”
Underwater borrowers, so common during the Great Recession, are nearly nonexistent in today’s market, Walden explains. Just 344,000 homeowners currently owe more on their homes than the properties are worth. There are less than half as many underwater homeowners than there were in 2019 before the onset of the pandemic, with only 3.9% having less than 10% equity, down from 6.6% in 2019.
While affordability for prospective homebuyers is nearly the worst it’s been in 37 years, low interest rates locked in during the COVID era continue to keep payments down for existing homeowners. Despite the average unpaid principal balance of existing mortgages hitting an all-time high in June ($242,000), the average interest rate on those loans sits at just 3.94%. Existing homeowners who have benefitted from $42 billion in cumulative savings through refinance in the past three years are now also benefitting from strong income growth as well.
Further, existing homeowners need just 21% of the median household income to make the average monthly P&I payment – as opposed to more than 36% for prospective homebuyers in today’s market. The small relative share of income needed for existing homeowners to meet their mortgage obligations, along with the strong credit quality of today’s mortgage holders and an acute focus on loss mitigation by the industry at large, are all contributing to today’s 16-year low in seriously delinquent mortgages.
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