Mortgage Monitor: Home Prices Decline 4th Month (Non-Seasonally Adjusted)

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Yearly home price appreciation has slowed for 10 months and month-over-month has been negative for four months.

The Black Knight Mortgage Monitor report for January 2019 shows a marked slowing in home price appreciation.

Mortgage Monitor Comments

  • The average home declined in value by 0.3% (-$850) in December, marking the fourth consecutive monthly decline in home prices
  • December marked the 10th straight month of slowing annual home price appreciation (HPA), falling from a high of 6.8% annual growth in February to 4.6% at the end of the year
  • The average home is now down an aggregate of $2,440 (-0.8%) in value from August 2018
  • With more than 50% of areas reporting, early numbers for January suggest we’re likely to see more of the same
  • The annual growth is still outpacing the 25-year average of 3.9% - although the gap is closing quickly
  • Falling rates continue to boost refinance incentives. Some 3.27 million homeowners with a mortgage could likely qualify for a refinance and reduce their interest rate at least .075% by doing so. That population is up nearly 75% from the 10-year low in November 2018, despite still being down 30% from late 2017 when rates were below 4%.

I asked Black Knight if they had seasonally-adjusted numbers or a longer timeline than shown in the report. The answers were no and yes respectively. Black Knight does not seasonally adjust numbers.

Home Price Index 2000-2019

Affordability

Home prices started soaring in the second half of 2012. The annual trend is growth at a slower pace.

Black Knight commented "declining prices and falling interest rates have made housing the most affordable it’s been since early in the 2018 home buying season. The recent decline in rates has translated into 6% more buying power while keeping monthly payments the same, or a $62/mo. reduction in P&I on the average-priced home. It now takes 22.2% of median income to purchase the average home with 20% down and a 30-year loan, down from a post-recession high of 23.4% just a few months ago."

Affordability has not improved to any significant degree. Annual home price growth still exceeds annual real income gains.

The ability to refinance would lower the monthly payment for existing homeowners but it does not help or even apply to new home seekers.

Finally, more affordable than record high unaffordable a few months back does not mean much.

It would take a collapse similar to 2007-2012 before homes are even modestly-priced.

Mike "Mish" Shedlock

Comments (14)
No. 1-8
themonosynaptic
themonosynaptic

There are probably a few headwinds facing housing, but one I learned from a financial adviser is that tax relief on interest only extends to $750,000 on mortgages now (Trump Tax "cut").

This, I believe, is combined, i.e. if you have a second home for rental, the mortgage on that is added to the mortgage on your first house.

$750,000 might sound a lot in some areas, but in many parts of NY and CA it will barely buy you a one bedroom apartment.

DFWRealEstate
DFWRealEstate

This aligns with what we are seeing in the Dallas-Fort Worth area pretty well. Prices are up on average, but the averages are being skewed by really expensive luxury home sales. At the margins, price appreciation had deteriorated. Not too hard to understand when the average price of new homes being sold is still falling, putting more pressure on existing home owners to get realistic with their expectations. The reality is that fewer buyers are available (or at least willing) to purchase expensive luxury homes.

ksdude
ksdude

Apparently my county tax "ass"essor isn't aware of this after bumping up my house by 17k this year. No changes to it or the area. Probably wont say anything otherwise ill just get on the "list" ad and they can hang me on any number of other things. That's why I have a fenced yard and non behaving dogs as they are continually out here snooping around on peoples property and walk right on it with no warning. I chased them off one time then got a visit from the cops later that day and lectured. Seeing less of them now that they have their little airplane flying overhead once every couple days to search the countryside. Not a joke. "Oh look, there's a junk boat in the woods behind that guys house. We got you now!" Sound crazy? They just showed up at my neighbors about a 2nd propane tank they weren't aware of.

abend237-04
abend237-04

People aren't stupid. The NPV of a house in America has just taken a major hit due to the latest tax code follies limiting mortgage interest deduction.

The National Association of Realtors predicted 5 to 10 percent impact on housing prices, during congressional cat-fighting over the final tax bill's terms, but what would they know?

KidHorn
KidHorn

Prices are going down, but from looking at the charts, it seems buying a home at any time since 2000 has been a good investment.

Mish
Mish

Editor

"Prices are going down, but from looking at the charts, it seems buying a home at any time since 2000 has been a good investment."

Assuming one could afford the mortgage payment. And buying at the peak took a long time to recover in an incredibly illiquid asset while one was underwater.

Six000mileyear
Six000mileyear

What a great chart from 2000. The comparison of today's price declines look like a strong signal based on the price behavior when the housing bubble began to pop. We know the housing market recovery after the bubble was weak in terms of volume and foot traffic, but the rally showed small price pullbacks along the way. The bubble never had a price drop as it inflated. Stick a fork in it. This housing market cycle is DONE.

everything
everything

Interest rate pop put a damper on it, that's why big dollar homes took a hit, and flipping those hit the skids. Higher wages makes up the difference for the rest of the market. Still, interest rates are nothing so that low and mid price still flourish.