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Black Knight: October 2022 Mortgage Monitor

  • Black Knight’s HPI showed that while home prices continued to decline in October, the 0.43% decline for the month (a 0.13% decline seasonally adjusted) was the smallest seen since prices peaked. maximum in June.

  • Annualized appreciation slowed to 9.3% from 10.7% in September, marking the seventh straight month of cooling, but the smallest decline since May

  • New listings for sale in October were 19% (-94K) below 2017-2019 levels, marking the largest shortfall in six years outside of March and April 2020, when much of the country was locked

  • Three months of stagnant inventory growth is easing the downward pressure on home prices due to home affordability still hovering near 35-year lows.

  • Despite the slowdown in price corrections, equity risk among 2022 purchase mortgages persists, while risk remains minimal among those who bought 12 months or more ago.

  • Of all homes purchased with a mortgage in 2022, 8% are now at least marginally underwater and nearly 40% have less than a 10% equity interest in their home, a situation more concentrated among FHA/VA loans

  • Overall, at just 0.84%, the negative equity rates among all foreclosed properties remain extremely low by historical standards.

  • More than 20% of 2022 FHA/VA purchase mortgage holders have now plunged into negative net worth, and nearly two-thirds have less than 10% equity

  • Prepayment defaults (loans delinquent within six months of origination) have risen among FHA borrowers over the past year and are now above pre-pandemic levels.

JACKSONVILLE, Fla. – December 5, 2022 – Today, the Data & Analytics division of Black Knight, Inc. (NYSE:BKI) released its latest Mortgage Monitor report, based on industry-leading mortgage, real estate and public records. of the company. data sets Despite home price corrections continuing in many markets across the country driven by limited affordability and higher rates, the pace of price declines has slowed considerably over the last two months. As Black Knight Data & Analytics President Ben Graboske explains, what would normally be an environment conducive to sharp declines in home prices has been somewhat offset by stagnant levels of inventory for sale.

“We’ve seen four straight months of declines in home prices nationwide,” Graboske said. “But after a couple of significant dips in early summer, the pace of cooling has slowed considerably, with October’s unseasonably adjusted drop of just 0.43% the smallest decline yet. Contradictory as it may seem, the environment for much higher rates may be limiting the pace of price corrections due to their dampening effect on inventory inflows and the subsequent stagnation in home sales activity. While median home prices are now at 3, 2% below its June high, down 1.5% seasonally adjusted, in a world of interest rates at 6.5% and above, affordability remains dangerously close to a low of 35. Add the effects of typical seasonality and one might expect a much steeper correction in prices than we have endured thus far, but endless inventory shortages have served to offset these other factors In fact, the volume of new listings for sale in October was 19% below the 2017-2019 pre-pandemic average. This marks the largest shortfall in six years outside of March and April. 2020 when much of the country was on lockdown, with the general market still over half a million listings below what we would consider ‘normal’ by historical measures.

“Although the house price correction has slowed, it has still exposed a significant pocket of equity risk. Make no mistake: negative equity rates remain well below historical averages, but a clear risk bifurcation has emerged between foreclosed homes purchased relatively recently versus those purchased early or before the pandemic The risk between prior purchases is essentially non-existent due to the large equity cushions these mortgage holders are sitting on. Recent mortgages aren’t doing as well Of the 450,000 borrowers dipped at the end of the third quarter, Nearly 60% of mortgages originated in the first nine months of 2022, and the majority were purchase loans Overall, 5 % of purchase mortgages originated so far in 2022 are now marginally underwater, with another 20% in equity positions bass. Specifically among FHA purchase mortgage holders, more than 20% have gone under and a full two-thirds have less than 10% equity. a potentially vulnerable cohort that we will continue to monitor closely in the coming months.”

Drilling down into the data for the month, Black Knight found that while it remains relatively low among conforming loans, the EPD rate, which captures mortgages that have become delinquent within In the six months since origination, it has risen among FHA loans for much of the past year to reach its highest level since 2009, excluding the months immediately following the pandemic. This also ties into the equity risk discussed above. These loans are based on home value growth and principal payments over time to gradually improve your equity positions. Given the questions surrounding the slowdown in price gains and corrections across the country, along with the rise in EPDs among FHA loans, Black Knight will continue to closely monitor such equity positions.

You can find much more information on these and other topics in this month’s Mortgage Monitor.

About the Mortgage Monitor

Black Knight’s data and analytics division manages the nation’s leading repository of loan-level residential mortgage data and performance information covering most of the general market, including tens of millions of loans across the spectrum of credit products. and more than 160 million historical records. . The combined insight from Black Knight HPI and Collateral Analytics real estate and home price data provides one of the most comprehensive, accurate and timely measures of home prices available, covering 95% of US residential properties. .down to the zip code level. In addition, the company maintains one of the most robust databases of public property records available, covering 99.9% of the US population and households in more than 3,100 counties.

Black Knight’s research experts carefully analyze this data to produce a summary supplemented by dozens of tables and graphs reflecting point-in-time and trend observations for the Mortgage Monitor Monthly Report. To review the full report, visit: https://www.blackknightinc.com/data-reports

About Black Knight

Black Knight, Inc. (NYSE:BKI) is an award-winning software, data, and analytics company driving innovation in the real estate and mortgage lending and servicing industries, as well as the capital and secondary markets. Businesses take advantage of our robust, integrated solutions throughout the homeownership lifecycle to help retain existing customers, win new customers, mitigate risk, and operate more effectively.

Our clients trust our proven, comprehensive, and scalable products and our unwavering commitment to providing superior customer support to achieve their strategic goals and better serve their customers. For more information about Black Knight, visit www.blackknightinc.com.