According to the most recent Black Knight Home Price Index released This Week in Real Estate affordability improved for the first time in 16 months this summer due to falling interest rates and the slowing rate of home price appreciation. Below are a few highlights from the fourth week of August that influence our business:
Affordability Improves For First Time in 16 Months. The national affordability landscape improved in July after 16 straight months of declines, according to a first look at the Black Knight Home Price index, which will be released later this month. The improved affordability is due to falling interest rates, which worked against rising home prices. But while home prices increased, the rate of increase slowed, Black Knight data showed. Home prices increased by 0.34% monthly in July, and rose 3.9% from July 2018. Over the last 16 months, the annual home price growth peaked at 6.75% in February 2018. July’s home price increase marked the 87th consecutive month of annual home price growth. In fact, July’s HPI shows year-over-year home price growth in all 50 states as well as 99 of the 100 largest U.S. housing markets. A recent report from First American even showed that consumer house-buying power reached its highest point in two decades. According to First American’s data, unadjusted house prices sit 6.3% above the housing boom peak. Whereas consumer buying power ticked up 3.3% between May and June, increasing 12.2% year over year.
Share of Homes Selling At or Above List Price 10 Percent Point Above Long Term Average. Ten years after the financial crisis, the national CoreLogic Home Price Index (HPI) has exceeded its pre-crisis peak and continues to grow but at a slower pace than in recent years. With home prices reaching many buyers’ budget limits, the share of homes selling at or above list price has returned to normal levels. The share of homes selling at or above list price has returned to early 2000 levels. In Q2 2018 that share peaked at 43% of total sales – almost triple the level during the trough in January 2008. As annual home price growth started to slow in Q3 2018, the share of homebuyers able to negotiate a better price began to rise. As of June 2019, the share of homes that were sold at or above list price has fallen to 39.2% – still 10 percent point higher than the average since 2000. San Francisco had the largest share of homes – 83% – that sold for at least the list price. Seattle and Minneapolis followed with 74% and 62% selling for the list price or more, respectively.
30-Year Mortgage Rate Declined in August. For the eighth straight month, information compiled by Freddie Mac shows that mortgage rates continued to decline. As of August 2019, the 30-year FRM – Commitment rate, fell by 15 basis points to 3.62 percent from 3.77 percent in July. The cycle peak was 4.87 percent in November. Despite different views on inflation, as shown by the split in voting, financial vulnerabilities, and the potential implications of trade and other uncertainties, members generally agreed to adopt a flexible policy stance in setting the future target range for the federal funds rate. The average 30-Year Fixed market rate, according to Freddie Mac, was at 3.55 percent at the end of August compared to 3.75 percent at the end of July. At the beginning of 2019, the average 30-Year Fixed market rate was 4.51 percent.