Black Knight, Inc.’s Mortgage Monitor report showed home price growth reaccelerating during the early months of 2022.
This, combined with a strained inventory and an increase of affordability pressures, has resulted in $2.6 trillion in tappable equity for mortgage holders nationwide. This gain was the largest annual increase on record, the company stated, and more than double than 2020’s high ($1.1 trillion). The increase gives the average homeowner a $48,000 bump for a total of $185,000 in equity.
“Home price appreciation over the course of 2021 was unlike anything that’s come before, and the incredible growth we’ve seen in homeowner equity is testament to that fact,” Black Knight Data and Analytics President Ben Graboske said in a release.
Graboske said total market leverage has also seen a record – for the first time it is below 45 percent.
“Both the Black Knight HPI and our collateral analytics daily tracking data showed home price growth reaccelerating as the year came to a close,” Graboske added. “In fact, at a time of the year that typically sees little to no price movement – home prices increased by 0.84 percent last month, marking the largest December price growth on record.”
Graboske said this increase in home prices, along with the recent interest rate jumps, have pushed the long-term, pre-Great Recession average payment-to-income ratio to the worst affordability levels since 2008.
“The interplay between prices and rates has significantly impacted affordability and borrower buying power in recent weeks. It now takes 25.8 percent of the median household income to purchase the average-priced home with 20 percent down and a 30-year mortgage, up from the 22.4 percent required at the end of Q3 2021.”
Because of this current climate, and according to Black Knight’s Optimal Blue rate lock data, homebuyers are increasingly choosing to pay more in points to buy down the rates on their mortgage to partially offset the effect of recent rate increases, further increasing the burden on today’s homebuyers.
Black Knight’s report also looked at the for-sale inventory crisis and its affect on the wider market. After the shortage of active listings briefly improved from June 2021 to September 2021 (-63 percent to -55 percent), more recent data has seen a return to -60 percent. The U.S. housing market is currently short between 500,000-750,000 active listings when compared to 2017-2019 December levels.