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August 2019 Mortgage Monitor

Lower Interest Rate Environment Boosts Home Affordability to Nearly Three-Year High; Home Price Growth Flat in August

  • As of the end of September 2019 – with the average 30-year interest rate at 3.64% – it now requires 20.7% of the national median income to make monthly principal and interest (P&I) payments on the average-priced home
  • That marks the second lowest national payment-to-income ratio in 20 months, behind only August 2019
  • Home affordability briefly hit a 32-month high in early September, when interest rates dipped below 3.5% for a single week
  • The $1,122 in monthly P&I required to purchase the average-priced home is down 10% from November – when interest rates peaked near 5% – despite home prices rising more than 4% from that point
  • Home affordability had hit a nine-year low back in November when the national payment-to-income ratio rose to 23.7%, spurring a noticeable and extended slowdown in home price growth
  • Despite strengthening home affordability as a result of recent interest rate declines, home price growth held flat in August after rising for the first time in 17 months in July
  • While prospective homebuyers continue to benefit from strong rate-driven buying power, interest rate movements are a key determining factor of housing affordability; significant shifts in either direction can change the landscape quickly

JACKSONVILLE, Fla. – Oct. 7, 2019 – Today, the Data & Analytics division of ICE released its latest Mortgage Monitor Report, based upon the company’s industry-leading mortgage performance, housing and public records datasets. This month, ICE’s analysts examined the impact of recent interest rate declines on home affordability, finding yet another situation where rate shifts in either direction have profound impact. As ICE Data & Analytics President Ben Graboske explained, the current lower interest rate environment has provided a boost to potential homebuyers.

“Back in November 2018, we were reporting on home affordability hitting a nine-year low,” said Graboske. “Interest rates were nearing 5%, pushing the share of national median income required to make the principal and interest (P&I) payments on the purchase of the average-priced home to 23.7%. While still below long-term averages, that made housing the least affordable it had been since 2009, spurring a noticeable and extended slowdown in home price growth. In the time since, rates have tumbled and the affordability outlook has improved significantly. That payment-to-income ratio is now 20.7%, which is the second lowest it has been in 20 months, behind only August of this year, and about 4.5% below the long-term, pre-crisis norm. To help quantify the boost this has given to homebuyers, consider that today’s prevailing 30-year rate has cut the monthly P&I payment to purchase the average-priced home by 10% – about $124 per month – from November. Put another way, the decline in rates since November has been enough to boost buying power by $46,000 while keeping monthly P&I payments the same.

“Despite falling interest rates and steadily improving affordability over the preceding eight months, annual home price growth held flat in August at 3.8% after rising for the first time in 17 months in July. It remains to be seen if this is merely a lull in what could be a reheating housing market, or a sign that low interest rates and stronger affordability may not be enough to muster another meaningful rise in home price growth across the U.S. That the strongest gains in – and strongest levels of – affordability were in August and early September could bode well for September/October housing numbers. As such, we’ll be keeping a close eye on the numbers coming out of the ICE Home Price Index over the coming months.”

The month’s analysis also shows that while falling interest rates have improved affordability across the country, pockets of tight affordability remain, especially along the western coast of the U.S. In fact, California accounts for seven of the 10 least affordable markets. In Los Angeles for example, even with rates at 3.64%, purchasing the average-priced home requires nearly 43% of the median household income — more than twice the national average. While down from more than 48% near the end of 2018, that payment-to-income ratio still makes Los Angeles the country’s least affordable market. Tight affordability on the West Coast was likely a key driver in the strong deceleration in home price growth that began as interest rates rose in late 2018. Interest rate movements have become a key determining factor of housing affordability and significant shifts in either direction can change the landscape quickly.

About Mortgage Monitor

The Data & Analytics division of Black Knight manages the nation’s leading repository of loan-level residential mortgage data and performance information covering the majority of the overall market, including tens of millions of loans across the spectrum of credit products and more than 160 million historical records. The combined insight of the Black Knight HPI and Collateral Analytics’ home price and real estate data provides one of the most complete, accurate and timely measures of home prices available, covering 95% of U.S. residential properties down to the ZIP-code level. In addition, the company maintains one of the most robust public property records databases available, covering 99.9% of the U.S. population and households from more than 3,100 counties.

Black Knight’s research experts carefully analyze this data to produce a summary supplemented by dozens of charts and graphs that reflect trend and point-in-time observations for the monthly Mortgage Monitor Report. To review the full report, visit: https://www.blackknightinc.com/data-reports/

About Black Knight

Black Knight, Inc. (NYSE:BKI) is an award-winning software, data and analytics company that drives innovation in the mortgage lending and servicing and real estate industries, as well as the capital and secondary markets. Businesses leverage our robust, integrated solutions across the entire homeownership life cycle to help retain existing customers, gain new customers, mitigate risk and operate more effectively.

Our clients rely on our proven, comprehensive, scalable products and our unwavering commitment to delivering superior client support to achieve their strategic goals and better serving their customers. For more information on Black Knight, please visit www.blackknightinc.com.

About Mortgage Monitor

ICE manages the nation’s leading repository of loan-level residential mortgage data and performance information covering the majority of the overall market, including tens of millions of loans across the spectrum of credit products and more than 160 million historical records. The combined insight of the ICE Home Price Index and ICE Valuation Analytics’ home price and real estate data provides one of the most complete, accurate and timely measures of home prices available, covering 95% of U.S. residential properties down to the ZIP-code level. In addition, the company maintains one of the most robust public property records databases available, covering 99.9% of the U.S. population and households from more than 3,100 counties.

ICE’s research experts carefully analyze this data to produce a summary supplemented by dozens of charts and graphs that reflect trend and point-in-time observations for the monthly Mortgage Monitor Report. To review the full report, visit: https://www.icemortgagetechnology.com/resources/data-reports

About Intercontinental Exchange

Intercontinental Exchange, Inc. (NYSE: ICE) is a Fortune 500 company that designs, builds and operates digital networks that connect people to opportunity. We provide financial technology and data services across major asset classes helping our customers access mission-critical workflow tools that increase transparency and efficiency. ICE’s futures, equity, and options exchanges – including the New York Stock Exchange – and clearing houses help people invest, raise capital and manage risk. We offer some of the world’s largest markets to trade and clear energy and environmental products. Our fixed income, data services and execution capabilities provide information, analytics and platforms that help our customers streamline processes and capitalize on opportunities. At ICE Mortgage Technology, we are transforming U.S. housing finance, from initial consumer engagement through loan production, closing, registration and the long-term servicing relationship. Together, ICE transforms, streamlines and automates industries to connect our customers to opportunity.

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Media Contacts

Mitch Cohen
704.890.8158
mitch.cohen@ice.com​​​

Katia Gonzalez
678.981.3882
katia.gonzalez@ice.com