Black Knight: 2021 Sees Record $2.6 Trillion Tappable Equity Gain; Home Prices Reaccelerate on Continued Inventory Shortfall As Rising Rates Increase Affordability Pressures

Rhea-AI Summary

On February 7, 2022, Black Knight, Inc. (NYSE:BKI) released its Mortgage Monitor Report, highlighting a record $2.6 trillion increase in tappable equity, bringing the total to $9.9 trillion, a 35% annual growth rate. Home price growth reaccelerated in late 2021 despite rising interest rates, resulting in the lowest market leverage on record. However, affordability has worsened, with 25.8% of median income now needed for an average home purchase. Additionally, the housing market faces a significant shortage of active listings, with 500,000-750,000 fewer homes available compared to pre-pandemic levels.

Positive

• Record tappable equity increase of $2.6 trillion, reaching $9.9 trillion.
• 35% annual growth rate in homeowner equity.
• Lowest total market leverage recorded, below 45%.
• Reaccelerated home price growth with a 0.84% increase in December.

Negative

• Affordability declines to the worst levels since 2008, requiring 25.8% of median income for home purchases.
• Active housing market listings are down by 500,000-750,000 compared to 2017-2019 levels.
• Refinance candidates decreased by 45% to less than 6 million.

JACKSONVILLE, Fla., Feb. 7, 2022 /PRNewswire/ -- Today, the Data & Analytics division of Black Knight, Inc. (NYSE:BKI) released its latest Mortgage Monitor Report, based upon the company's industry-leading mortgage, real estate and public records datasets. After a year of historic home price gains, homeowners' tappable equity – the amount available for a mortgage-holder to access while retaining at least a 20% equity stake in their home – has hit yet another record high. According to Black Knight Data & Analytics President Ben Graboske, Q4 2021's nearly half-billion-dollar increase in tappable equity has also resulted in the lowest total market leverage on record.

"Home price appreciation over the course of 2021 was unlike anything that's come before, and the incredible growth we've seen in homeowner equity is testament to that fact," said Graboske. "The aggregate total of $9.9 trillion represents an astounding 35% annual growth rate – which works out to an increase of $2.6 trillion in tappable equity in a single year. That's $185,000 available to the average mortgage holder before hitting a maximum combined loan-to-value ratio of 80%. In fact, it's driven total market leverage down below 45% for the first time on record. And while we saw the rate of home price growth begin to slow beginning in July 2021, that trend has since reversed – as has the modicum of improvement we'd started to see in inventory levels – making even further gains likely, at least in the near term. Both the Black Knight HPI and our Collateral Analytics daily tracking data showed home price growth reaccelerating as the year came to a close. In fact, at a time of the year that typically sees little to no price movement – home prices increased by 0.84% last month, marking the largest December price growth on record.  

"That same daily data suggests the trend continued in January – even as interest rates began to spike. The interplay between prices and rates has significantly impacted affordability and borrower buying power in recent weeks. It now takes 25.8% of the median household income to purchase the average-priced home with 20% down and a 30-year mortgage, up from the 22.4% required at the end of Q3 2021. Interest rate jumps in recent weeks have pushed us – and quite quickly – above the long-term, pre-Great Recession average payment-to-income ratio of 25%, straight to the worst affordability levels since 2008. In response, our Optimal Blue rate lock data shows homebuyers are increasingly choosing to pay more in points to buy down the rates on their mortgages to partially offset the effect of recent rate increases, further increasing the burden on today's homebuyers."

This month's Mortgage Monitor drills deeper into the current for-sale inventory crisis and its effects on the wider market. Analyzing Collateral Analytics data alongside industry consensus estimates, the report finds the number of new homes hitting the market has run a deficit for 30 consecutive months. After seeing the shortage of active listings improve from -63% in June 2021 to -55% in September, the deficit has begun to worsen, climbing back to -60% and trending in the wrong direction as of December. In total, the U.S. housing market is currently short between 500,000-750,000 active listings when compared to 2017-2019 December inventory levels.

Rising rates have also impacted refinance incentives, accelerating the shift to an equity-centric refi market. In the first weeks of the year, the market has seen a population of 11 million high-quality refi candidates cut down to less than 6 million – a 45% reduction. However, while paling in comparison to the nearly 19 million refi candidates just over a year ago, it still surpasses the average population of refi candidates during the 10-year span prior to the pandemic period. Analyzing the current distribution of first-lien interest rates alongside historical refinance pull-through rates and consensus 30-year rate forecasts, Black Knight estimates refi activity could pull back by more than 60% in 2022. Although this would cut overall originations by a third from 2020-2021, 2022 volumes would still be on the high end of the 2008-2019 era, with a stronger mix towards purchase lending (55-60%) and cash-out activity.

About the 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/.

For more information:
Michelle Kersch	Mitch Cohen
904.854.5043	704.890.8158
michelle.kersch@bkfs.com	mitch.cohen@bkfs.com

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SOURCE Black Knight, Inc.

FAQ

What did Black Knight report about tappable equity on February 7, 2022?

Black Knight reported a record $2.6 trillion increase in tappable equity, totaling $9.9 trillion as of Q4 2021.

How has home price growth changed according to Black Knight's Mortgage Monitor Report?

Home price growth reaccelerated in December 2021, increasing by 0.84%, the largest recorded for that month.

What is the impact of rising interest rates on housing affordability?

Rising interest rates have worsened affordability, requiring 25.8% of median income to purchase an average home.

What is the current state of the housing inventory according to Black Knight?

The housing market is experiencing a shortage of 500,000-750,000 active listings compared to pre-pandemic levels.

What has happened to refinance candidates in early 2022?

The number of high-quality refinance candidates has dropped by 45%, from 11 million to less than 6 million.