Record pricing brings home affordability to 15-year low

Record home price growth has created the worst housing affordability since the period just before the Great Recession, according to new Black Knight data.

February’s home prices were up 1.84% from January and 19.6% higher since last February, according to Black Knight’s Mortgage Monitor Report of February data. Meanwhile, the 30-year fixed-rate mortgage rose more than 125 basis points over Q1 2022, the sharpest 12-week rise in 27 years.

“This combination of accelerating growth and sharply rising interest rates has resulted in the tightest affordability in 15 years,” said Ben Graboske, Black Knight president, in a press release.

The upward trend in home pricing continued from January. The nation’s 100 largest markets registered double-digit annual growth in February due in part to significantly low housing supply. Interest rates jumped 50 basis points in mid-March, the largest 2-week increase Black Knight has recorded in over a decade.

Today, it takes 29.1% of the median household income to make the principal and interest payment for an average-priced home, above the 21% rate that typically cools the market, according to Black Knight. Today’s rate still sits below the 34% payment-to-income ratio in 2006.

The delinquency rate rose 1.8% in February to 3.36%, the first jump in nine months, Black Knight said. The increase was driven by early-stage delinquencies, in which 97,000 borrowers became 30-60 days past due, still 25% below pre-pandemic levels.

Across the nation, 787,000 borrowers remain seriously delinquent, or 90 days or more past due, although the total amount fell 8%, according to Black Knight. Forbearance plan volume dipped 6%, or by 47,000 loans over a 30-day period from mid-February to mid-March, and 97,000 more are scheduled for review in April, according to Black Knight. In total, an unpaid balance of $134 billion remains across 743,000 loans in forbearance nationwide.

Foreclosures are also trending down, with February’s 25,000 starts representing a 24% decline from a spike in January, the report said. Referrals for foreclosure also pulled back after increasing nearly sevenfold in January, and starts in February were 23% below pre-pandemic levels.

The interest rate environment has significantly depressed refinance volumes, continuing their precipitous decline. Rate and term refi prepayments are at their lowest level since mid-2019 and 80% below their early 2021 peak, according to Black Knight. Cash-out refis, coming off a 17-year high in 2021, are down 30% from their peak but still remain approximately twice as high as mid-2019.

“Purchase prepayments are expected to rebound in coming months following the normal seasonal pattern, while equity-related prepays will continue to dominate the refinance picture,” the report said.