ICE (Black Knight) Mortgage Monitor: "Home Prices Set Yet Another Record in August"

Press Release: As Home Prices Set Yet Another Record in August, Pushing Annual Growth Rate Sharply Higher, Small but Active Cash-Out Refinance Market Defies Traditional Analysis

Today, Black Knight, now part of Intercontinental Exchange, Inc. (NYSE:ICE), released its October 2023 ICE Mortgage Monitor Report, based on the company’s industry-leading mortgage, real estate and public records data sets. Among other topics, this month’s report leverages the ICE Home Price Index (formerly the Black Knight HPI) to get the latest reads on the reacceleration of annual home price appreciation (HPA) seen over the last several months. As ICE Vice President of Enterprise Research Andy Walden explains, August was another month of strong price gains.

“After essentially flattening earlier this year, year-over-year home price growth has been reaccelerating for the last few months,” said Walden. “Growth remained strong in August, with home prices up a seasonally adjusted +0.68% from July hitting yet another record high for the fourth consecutive month. It was widespread, as well; prices in nearly half of the nation’s 50 largest markets climbed by +0.75% or more. Even on a non-adjusted basis, August’s gain of +0.24% was more than 60% larger than the 25-year average for the month. Either way you look at it, the increase was sufficient to push annual appreciation up to a stronger-than-expected +3.8%. This marks three months of clear acceleration in the rate of growth at the national level, with annual HPA up from +2.4% in July and just +0.25% back in May. Likewise, August marked the second consecutive month in which annual HPA trended higher in every one of the 50 largest U.S. markets, mirroring the sharp reacceleration we’re seeing at the national level. …

The same high interest rate environment continues to put downward pressure on mortgage origination activity, which remains overwhelmingly dominated by the purchase loans estimated to make up an 82% share of overall 2023 mortgage lending. Purchase lending is expected to continue to dominate the market through 2024, which should make it the primary focus for lenders.
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House Prices Increased in August

Note: The ICE (formerly Black Knight) House Price Index (HPI) is a repeat sales index. Black Knight reports the median price change of the repeat sales. Here is a graph of the ICE HPI. The index is up 3.8% year-over-year.

• Home prices came in exceptionally strong in August, rising a seasonally adjusted +0.68% from July; August’s non-adjusted gain (+0.24%) was more than 60% larger than the 25-year same-month average (+0.15%)

• Along with a lower starting point due to late-2022 price drops, August’s increase was enough to push the annual rate of home price growth to +3.8%, up from +2.4% in July and just +0.25% back in May

• According to the ICE Home Price Index (formerly the Black Knight HPI), this marked the third consecutive month of reacceleration after annual home price growth slowed to effectively flat earlier this year

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Active Mortgages by Interest Rate and Vintage

Some interesting data on mortgage rates. Note the higher mortgage rates for the 2023 vintage - still a small portion of the overall market. A large portion of active mortgages are in the 2020-2022 vintages.

• Given all the talk about near-term prepayment risk – and quick-turn refinance incentive – among recent originations, we thought it prudent to see how much refinance volume may make its way into the market should 30-year rates begin to ease

• As loans seasoned between two and ten years tend to have rates lower than 5%, we explore the distribution of current interest rates among recent originations to help quantify where any pockets of opportunity may exist

• Mortgages originated over the past 18 months are evenly distributed across rate bands ranging from the mid-3% range up through the high 6% range, meaning that rate/term refinance volumes would return gradually should rates improve

• Relatively few loans (~600K as of August month end) have interest rates at or above 7%, such that it would take rates markedly lower than they are today to spur any meaningful refinance incentive

• While 600K may sound significant, historically an average month yields 430K refinances, if every homeowner with a first lien rate of 7% or higher were to refinance it would only result in 1.5 months of ‘normal’ volume

• Another 1.9M loans have rates between 6% and 7%, which would produce moderate opportunity, but rates would need to come down to the mid- to low-5% range to put all of those borrowers in the money, and even that would only be enough for a few months of sustained volume

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Mortgage Delinquencies decreased Slightly in August.

Here is a graph on delinquencies from ICE. Overall delinquencies increased slightly in August and are just above the record low in March.

• The national delinquency rate dropped 4 basis points (bps) in August to 3.17%

• That is down 2 bps year over year and 1.1 percentage points below the 2000-2005 same month average

• The number of mortgage holders either 30 or 60 days late (early-stage delinquencies) have each been growing in recent months

• 30-day delinquencies have risen for the last three months, while those 60-days past due have risen for the last five

• Serious delinquencies (90+ days past due) continued to improve, falling 20K from July to 448K – still the lowest level since June 2006 – and down 151K (-25%) year over year