Monthly mortgage payments far exceed 2020’s high: Black Knight

The scant affordability gains for home buyers from last year’s record low rates have now disappeared, disappointing the hopes of those who looked to take advantage of a housing market downturn related to the pandemic, according to a report released Monday.

The loan payment needed to buy a median priced home with 20% down at prevailing mortgage rates last month was $1,203, compared to $1,117 a year ago, Black Knight found.

The change won’t hurt the average home shopper’s incentive to make a purchase, but it means those who were looking to “buy the dip” in prices amid the pandemic may have missed their chance.

“Housing is the least-affordable it’s been — factoring in interest rates, home prices and income — since mid-2019,” said Ben Graboske, president of Black Knight Data and Analytics, in a press release.

The average monthly payment for a median priced home bottomed out in July of last year at just over $1,094, compared to $1,113 in the summer of 2019. The last time it was as high as it is now was in November 2018 at $1,236.

Although rates plummeted last year, their impact on affordability was muted by a supply-demand imbalance that has been driving home values up.

“Any hopes of 2021 bringing an influx of homes to the market and lessening pressure on prices appear to be dashed for now,” Graboske said.

A 37,000 person consecutive-month increase in residential construction employment for March and vaccine rollouts suggest home availability could improve, but not to the degree needed to provide consumers with price relief.

“More gains will be needed to help ease supply constraints present in this sector,” said Doug Duncan, chief economist at Fannie Mae, in an email commenting on last Friday’s Bureau of Labor Statistics report.

The outlook for demand looks unlikely to change as well although, to be sure, there are some wild cards at play that could change that. For example, there could turn out to be long-term damage to the economy from the pandemic even after vaccinations are complete and rescue funds are discontinued.

To date, although overall unemployment hasn’t returned to its prepandemic low of 3.5% and remains slightly inflated by a legacy reporting error, it keeps slowly improving. It inched down to 6% from 6.2% on a consecutive-month basis in the latest jobs report.

Nonbank mortgage banker and broker payrolls, which are reported with a one-month lag, rose during February to 374,400 from a downwardly revised 371,100 in January and were elevated compared to 309,300 in February 2020.