Recent data from Black Knight’s Data and Analytics division’s Mortgage Monitor Report showed home prices and interest rates are reaching all-time highs, causing sharp declines in home affordability.
According to Black Knight, home prices rose 2.3 percent in March, making it the fifth time in two years that homes have increased by more than 2 percent in a single month. The annual home price appreciation for March was 19.9 percent, a decline from 20.1 percent in February.
“After accelerating for the last four months, the rate of annual home-price growth actually slowed a bit in March,” Black Knight Data & Analytics President Ben Graboske said. “Still, at 19.9 percent — down from an upwardly revised 20.1 percent in February – March would have otherwise set yet another record for appreciation.”
Black Knight measured the share of median income required to make the premium and interest (P&I) payment on the average-priced home bought with 20 percent down. This measurement indicated U.S. housing was at its all-time least affordable in July 2006, when it took 34.1percent to make that P&I payment.
“At the end of February 2022, we were already at 29.1 percent — and both rates and prices have continued to climb since then,” Graboske said. “As of April 21, that payment-to-income ratio has now climbed all the way to 32.5 percent, within just 1.6 percentage points of the prior record.”
“In ‘kitchen table’ terms, that equates to a $522 higher average monthly P&I payment — a 38 percent increase since January — with that payment up $790 (72 percent) since the start of the pandemic,” Graboske continued. “It won’t take much to push us past 2006 levels either; a 50 basis points jump in 30-year offerings or a 5 percent rise in home prices would push affordability to its worst level on record. And saying that, we should also keep in mind that they’ve already risen 200 basis points and 5.9 percent respectively this year.”