Black Knight: 8% of 2022 Mortgaged Home Purchases Now Underwater; FHA Loans See Early-Payment Defaults Rise
The latest Mortgage Monitor Report from Black Knight, Inc. (NYSE: BKI) indicates a continuation of home price declines, with a 0.43% decline in October, the smallest drop since June. Annualized appreciation slowed to 9.3%. New listings in October were 19% below pre-pandemic levels, the largest deficit in six years. Equity risk persists, with 8% of 2022 mortgaged homes underwater, particularly among FHA/VA loans. Although negative equity remains low historically at 0.84%, rising early-payment defaults among FHA borrowers pose a concern.
- The 0.43% decline in home prices is the smallest since June.
- Annualized appreciation decreased to 9.3%, indicating a slower correction.
- Negative equity rates remain low historically at 0.84%.
- 8% of homes purchased with a mortgage in 2022 are underwater.
- Over 20% of FHA/VA mortgage holders are in negative equity.
- Rising early-payment defaults among FHA loans are concerning.
- Black Knight's HPI showed that while home prices continued to pull back in October, the month's
0.43% decline (a seasonally adjusted0.13% decrease) was the smallest seen since prices peaked in June - Annualized appreciation slowed to
9.3% from September's10.7% , marking the seventh consecutive month of cooling, but the smallest such decline since May - New for-sale listings in October were
19% (-94K) below 2017-2019 levels, marking the largest deficit in six years – outside of March and April 2020 when much of the country was in lockdown - Three months of stalled inventory growth is softening downward pressure on home prices from home affordability that still remains near 35-year lows
- Despite the slowdown in price corrections, equity risk among 2022 purchase mortgages persists, while risk remains minimal among those who bought 12 or more months ago
- Of all homes purchased with a mortgage in 2022,
8% are now at least marginally underwater and nearly40% have less than10% equity stakes in their home, a situation most concentrated among FHA/VA loans - Overall, at just
0.84% , negative equity rates among all mortgaged properties remain extremely low by historical standards - More than
20% of 2022 FHA/VA purchase mortgage holders have now dipped into negative equity, with nearly two-thirds having less than10% equity - Early-payment defaults – loans delinquent within six months of origination – have been rising among FHA borrowers over the past year and now sit above pre-pandemic levels
JACKSONVILLE, Fla., Dec. 5, 2022 /PRNewswire/ -- Today, the Data & Analytics division of Black Knight, Inc. (NYSE: BKI) released its latest Mortgage Monitor Report, based on the company's industry-leading mortgage, real estate and public records datasets. Despite home price corrections continuing in many markets nationwide driven by tight affordability and higher rates, the pace of price declines has slowed measurably over the past two months. As Black Knight Data & Analytics President Ben Graboske explains, what would ordinarily be an environment ripe for steep declines in home prices has been offset somewhat by stagnant levels of for-sale inventory.
"We've now seen four consecutive months of home price pullbacks at the national level," said Graboske. "But after a couple of significant drops earlier in the summer, the pace of cooling has slowed considerably, with October's non-seasonally adjusted drop of just
"Though the home price correction has slowed, it has still exposed a meaningful pocket of equity risk. Make no mistake: negative equity rates continue to run far below historical averages, but a clear bifurcation of risk has emerged between mortgaged homes purchased relatively recently versus those bought early in or before the pandemic. Risk among earlier purchases is essentially nonexistent given the large equity cushions these mortgage holders are sitting on. More recent homebuyers don't fare as well. Of the 450K underwater borrowers at the end of Q3, the mortgages of nearly
Digging deeper into the month's data, Black Knight found that, while still relatively low among conforming loans, the early-payment default (EPD) rate – which captures mortgages that have become delinquent within six months of origination –– has risen among FHA loans for much of the past year to reach its highest level since 2009, excluding the months in the immediate wake of the pandemic. This ties into the equity risk discussed above as well. Such loans rely on rising home values and principal pay-downs over time to gradually improve their equity positions. Given the questions surrounding slowing price gains and corrections around the country, along with rising EPDs among FHA loans, Black Knight will continue to monitor such equity positions closely.
Much more information on these and other topics can be found in this month's 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
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/
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/.
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SOURCE Black Knight, Inc.
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