Massive tangible equity and other record price gains -Black Knight Mortgage Monitor
We recently summarized a report from the Urban Institute (UI) on the apparent reluctance of sellers to accept offers from potential buyers intending to take advantage of FHA or VA funding. UI based its conclusion on both a survey of real estate agents conducted by the National Association of Realtors and the recent decline in the FHA and VA share of startups. Black Knight, in his new one Mortgage monitor with data on credit performance for May, validated, to some extent, UI’s proposal using recent mortgage-backed securities (MBS) issues.
The company says Ginnie Mac’s securities, which are mostly FHA and VA loans, are around one third of the agency market before the pandemic. It has fallen below 25 percent in the past few months. The loss was caused in part by borrowers with higher balances, more equity, and better credit scores, who responded to the opportunities presented by low interest rates and refinancing. These borrowers are usually able to get mortgages from GSE (Fannie Mae and Freddie Mac). There is also a trend for FHA borrowers with increased equity to be able to refinance FHA mortgages and have their lifetime commitment to the mortgage insurance fund.
But Ginnie Mae’s share of purchase credit has also decreased. drop below 40 percent in April and May for the first time in recent history. Like UI, Black Knight attributes this to the stricter inspection standards required of FHA borrowers and the unwillingness of sellers to bet on a successful deal in the hypercompetitive marketplace.
May was another month of recording House price growth that
third in a row. The year-on-year increase of 18 percent in May eclipsed the record growth of 14.8 percent in April. Black Knight Data & Analytics President Ben Graboske said, “In all fairness, property values are rising at prices we’ve simply never seen before as low interest rates, extremely tight inventory and increasingly competitive homebuyers create a truly unprecedented market. “
The average home price is now up more than 10 percent ($ 33,000) in the first five months of 2021 alone and nearly $ 63,000 (+20.3 percent) since the pandemic began.
The growth rate continues to accelerate, increasing by more than 2 percent in both April and May. Before the start of 2021, no month had seen 2 percent growth in a single month, and that was the 2.1 percent growth in May largest increase in Black Knight records dating back to the mid-1990s. The company’s Collateral Analytics group says their sales data for the first three months of June suggests the acceleration could continue. The average sales prices of single-family homes rose by 25 percent on an annual basis during this period.
The appreciation pushed tangible equity to another record high, a total of $ 81 trillion at the end of the first quarter. Homeowners on a mortgage found that usable equity (the amount available while maintaining a mortgage lending value (LTV) of 80 percent or less) increased 11 percent in the quarter for total income of $ 800 billion and a Growth has increased by 23 percent annually.
Homeowners could tap right now $ 153,000 equity, up $ 16,000 from the end of Q4 2020. Total mortgage debt is 48 percent of associated home values nationwide, the lowest percentage since at least 2005.
Of course there is disadvantage at these price increases. These enormous price gains also contribute to this Affordability Concerns. With prices up $ 33,000 since the beginning of the year, it now takes 191 more monthly principal and interest payments to buy the average home. Assuming a down payment of 20 percent, the mortgage payment for the average home will now consume 21.3 percent of the average national income. Even if the 30-year fixed-rate mortgage has remained relatively stable at around 3.0 percent, the payout rate has increased by 18.1 percent since the beginning of the year.
Black Knight notes that while equity has increased, so has the proportion of Pay off
Refinancing. This is, of course, partly due to the rise in mortgage rates, which reduced the number of candidates for interest / term refinancing from 14.1 million in the week leading up to the last Federal Reserve Open Market Committee meeting to 12.2 percent the following week . That pool has a potential of $ 3.4 billion in monthly refinancing savings, but the company said borrowers have been less responsive to refinancing incentives in recent weeks.
On the other hand, almost half of the usable equity is held by borrowers with interest payments
Rates over 3.75 percent, This offers the opportunity to both cut prices and pull cash out of their homes. 42 percent of the refinancing rate freezes in the first three weeks of June were cash-out loans, the highest proportion in more than two years. But nearly a quarter of usable equity is held by homeowners with interest rates below 3.0 percent, which could also create demand for second mortgages like home equity lines of credit (HELOCs).
Finally, in its “first look” at the May data, Black Knight saw a 1.5 percent increase in mortgage defaults on the calendar. Not only did the month end on a Sunday, leaving less time to process last-minute mortgage payments, but the following Monday was Memorial Day holiday. The number of overdue mortgages rose by 11,000 compared to the previous month.
The company updated this information in the Mortgage monitor. Until May 25th 91.8 percent of borrowers had made their payment in May, the highest since the pandemic began. This suggests that the defaults would have continued their previous decline had the calendar not intervened. This was more or less confirmed by the next month’s performance through June 25th. By that date, approximately 92.3 percent of the month’s payments had been received.