No relief for buyers as home price growth intensifies in May

The perfect storm of sizzling demand and a stark lack inventory continued to drive home price growth in May, with home price growth hitting recent records by multiple companies’ metrics.

CoreLogic’s Home Price Index (HPI), for example, recorded a 15.4% annual gain during the month, the index’s largest annual gain since November 2005. It was the HPI’s fourth consecutive month of double-digit annual gains, with May’s yearly increase up from the annual uptick of 13.0% in April.

Black Knight’s Mortgage Monitor reported an even larger year-over-year home price jump in May, logging an astonishing increase of nearly 18%, up from 14.8% in April.

Monthly appreciation also remains rapid. Month over month, CoreLogic’s HPI is up 2.3% in May, while Black Knight has the figure at 2.1% — the sharpest monthly increase on record per Black Knight’s figures.

“Frankly, home values are appreciating at rates we’ve simply never seen before, as low interest rates, ultra-scarce inventory and increasingly competitive homebuyers combine to create a truly unprecedented market,” said Ben Graboske, data & analytics president at Black Knight.

According to Black Knight, single-family home prices are up more than 18% from last May, a record per to the company’s data. Per Black Knight’s figures, the average home price is now up more than 10% through the first five months of 2021 alone, and up 20.3% — almost $63,000 — since the pandemic began.

Just since the start of the year, monthly principal and interest payments to purchase the average priced home have grown by $191, Black Knight reported.

And Graboske noted that price growth has been geographically broad-based, with each of the country’s 100 largest metros seeing price growth in May. Even the slowest appreciation metro in the top 100, according to Black Knight’s numbers, is seeing at least 10% annual price growth.

“Data from our Collateral Analytics Group suggests even further acceleration may be on tap, as the median sales price of single-family homes in the first three weeks of June was already up 25% year-over-year,” Graboske said.

That’s not great news for many potential house hunters, especially first-time buyers, low-income households, and millennial/Gen Z hopefuls looking to wade into homeownership thanks to the low mortgage rate environment. A recent CoreLogic survey found that 82% of consumers flagged housing affordability as a key problem, with 33% of respondents saying they would wait to buy or not buy at all rather than make sacrifices on their home purchase.

“First-time buyers are hitting a wall in many places around the country as the pace of home price rises outpace the benefits of lower borrowing costs,” said Frank Martell, president and CEO of CoreLogic. “Younger and first-time buyers, including younger millennials, are faced with the challenge of having sufficient savings for a down payment, closing costs and cash reserves,”

“As we look to the balance of 2021, we expect price rises to continue which could very well push prospective buyers out of the market in many areas and slow home price growth over the next year.”

Meanwhile, Graboske observed that rising prices have begun to impact borrower behaviors on both the purchase and refinance sides of the coin.

“Obviously, as home values increase, so do levels of available, tappable equity, which hit an all-time high of $8.1 trillion in Q1,” he said. “In turn, rising equity levels provide homeowners with more refinance options – switching from an FHA to a GSE loan, for example, to both lower a borrower’s interest rate and potentially eliminate mortgage insurance payments at the same time. Digging into our eMBS data, we do find that the GNMA (Government National Mortgage Association) share of agency securitizations has fallen noticeably since the onset of the pandemic.

“Back then, GNMA securities – comprised primarily of FHA and VA loans – made up about a third of agency securitizations; today they’re less than 25%,” continued Graboske. “Looking at securitizations by purpose, we see the GNMA share of purchase lending has also been falling, dropping below 40% in April and May for the first time in recent history. In contrast, the share of GSE purchase lending has increased as stricter FHA property inspection requirements may be making for less attractive offers in today’s hyper-competitive real estate market, when sellers are often choosing between multiple offers and looking for any reason to thin the herd.”


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