Black Knight Mortgage Monitor: "Home Prices Down Again in August. Now 2% Off June Peak

Today, the Data & Analytics division of Black Knight, Inc. (NYSE:BKI) released its latest Mortgage Monitor Report, based upon the company’s industry-leading mortgage, real estate and public records datasets. With all eyes on the housing market, the most recent data from the Black Knight Home Price Index showed that home prices declined for a second consecutive month in August. As Black Knight Data & Analytics President Ben Graboske explains, July and August’s month-over-month declines mark the sharpest contractions seen in more than 13 years.

“The Black Knight HPI for August marked the second consecutive month that prices pulled back at the national level, with the median home price now 2% off of its June peak,” said Graboske. “Only marginally better than July’s revised 1.05% monthly decline, home prices were down an additional 0.98% in August. Either one of them would have been the largest single-month price decline since January 2009 – together they represent two straight months of significant pullbacks after more than two years of record-breaking growth. The only months with materially higher single-month price declines than we’ve seen in July and August were in the winter of 2008, following the Lehman Brothers bankruptcy and subsequent financial crisis. …

Though prices have pulled back from recent historic peaks, housing remains historically unaffordable. After improving slightly in July and early August, surging 30-year rates have pushed home affordability to its worst point in 38 years, easily surpassing June’s – at the time – record-setting 34.3% payment-to-income ratio. With rates at 6.7% as of Sept. 29, 38.2% of the median household income is needed to make the principal and interest (P&I) payment on the median-priced home purchase, the largest share since December 1984, when mortgage rates were at 13.2%. The monthly P&I payment on the median home is up $930 from the same time last year – a 73% increase. The situation is geographically widespread as well, with 84 of the 100 largest U.S. markets now at more than three-decade lows in terms of home affordability.

House Prices Declined Sharply in August
Here is a graph of the Black Knight HPI. The index is still up 12.1% year-over-year but was down almost 1% in August (after a similar decline in July).

According to the Black Knight HPI, median home prices fell 0.98% in August, only marginally better than July's upwardly revised 1.05% monthly decline
July and August 2022 mark the largest single-month price declines seen since January 2009 and rank among the eight largest on record
The housing market has not seen such a significant two-month drop in prices since shortly after the collapse of Lehman Brothers in the winter of 2008

With the current rate of monthly price declines rivaling, and in many markets outpacing, those of the Great Recession, the question becomes how long this trend will continue
All in, the average home price is down 2% ($8.8K) from its June peak nationally as we enter a five-month span from September through January in which home prices tend to face more neutral to negative seasonal pressure
Prices are beginning to come off post-pandemic peaks but remain up 12.1% from the same time last year due to the record growth seen in late 2021 and early 2022
Annual home price growth rates are poised to continue falling in coming months

National Payment to Income Ratio; Housing Least Affordable Since 1980s
And on the payment to income ratio:

As of Sept. 22, with interest rates at 6.29%, it required 36.6% of the median household income to make the principal and interest payment on the average home purchase, the largest share since May 1985
Back then, 30-year mortgage rates were 12.9%, nearly twice what they are today, but incomes and home prices held relatively stable
The monthly mortgage payment (P&I) required to purchase the average-priced home with a 20% down payment is now up $840 from the same time last year, a staggering 66% increase
Renewed affordability challenges are likely to continue to put downward pressure on both purchase volumes and prices in coming months

Mortgage Delinquencies Near Record Lows

The national delinquency rate fell 10 BPS in August to 2.79%, just 4 BPS off the record low set in May of this year
After dropping steadily in recent months, the number of loan curing from 90 or more days delinquent to current rose slightly to 62K in August from 58K the previous month
Foreclosure starts increased by 15% in the month to 20K, but remained 44% below pre-pandemic levels