I’ve written several articles on why we have no risk of a Real Estate Market Bubble popping. Here is some new data to support my convictions.

Owning a home has grown to be a crucial part of the American dream. Over 86% of buyers feel that owning a home is still part of the American dream, according to a new National Association of Realtors survey.

Less than half of Americans owned a home prior to the 1950s. The GI Bill, on the other hand, allowed many returning veterans to buy a house following World War II. There has been an increase in the percentage of homeowners in the United States since then, reaching a current level of 65.5 percent.
Since then, home values have continued to rise as a result of the strong demand for homeownership.
The following graph shows the increase in property prices since World War II ended:

This graph illustrates that only during the housing boom and recession of 2006-2008 did home values fall dramatically. You can see a similarity between the present price surge and the price spike that occurred before to 2006. That may cause some people to worry that we’re on the verge of a repeat of the housing bubble’s collapse. Let’s take a look at the past and present to see if we can allay some of those fears.
What triggered the Great Recession of the 1990s?

Foreclosures deluged the market in 2006. As a result, property values plummeted. Foreclosures were caused by two factors: As a result of buyers not being properly eligible for their mortgages, a greater number of homes were lost to foreclosure. Many homeowners took advantage of their home’s equity.
When prices fell, they ended up in a precarious position (where the home was worth less than the mortgage on the house).

Many of these homeowners decided to leave their houses, which resulted in a rise in foreclosures.
This further impacted the value of the homes in the immediate area. For years, the same thing happened. Why the Real Estate Market in the United States Is Changing The current market is very different from the one we saw 15 years ago for the following two reasons:

Homeownership has never been more in demand than it is today (Not Artificially Generated) By lowering their lending requirements and making it easy for anyone to qualify for either a home loan or a refinance in the years leading up to 2006, banks created a false demand. Mortgage lenders have raised the bar significantly for first-time buyers and those refinancing their homes. The amount of risk that banks were willing to assume, according to data from the Urban Institute,

Challenge my observation and this data? Please respond, love to hear your views!

A picture of two palm trees from underneath their branches, with a tall building in the bottom-left background.

May 17, 2022

Florida is the place to be! Jacksonville will be in the top five, soon enough! Florida has five of the hottest commercial real estate metro markets in the first quarter: Orlando, Miami, Palm Beach Fort Lauderdale, and Fort Myers, according to new research from the National Association of REALTORS®.

NAR’s Commercial Real Estate Market Conditions Index is calculated by factoring in 25 variables that reflect a metro area’s economic conditions, demographics, and employment, such as job growth, wage increases, and population growth, as well as market conditions on vacancy rates, absorption, rent growth, cap rates, and more.

Overall, the South boasts the most booming commercial markets, with 11 of the top markets.

NAR’s index identified the following 16 markets as the hottest in commercial real estate in the first quarter. (Learn more about each of these markets at NAR’s Economists’ Outlook blog.)

  • Orlando-Kissimmee-Sanford, Fla.
  • Miami-Miami Beach-Kendall, Fla.
  • West Palm Beach-Boca Raton-Delray Beach, Fla.
  • Fort Lauderdale-Pompano Beach-Deerfield Beach, Fla.
  • Fort Myers, Fla.
  • Savannah, Ga.
  • Austin, Texas
  • Boston-Cambridge-Nashua, Mass.
  • Riverside-San Bernardino-Ontario (Inland Empire), Calif.
  • Atlanta-Sandy Springs-Roswell, Ga.
  • Asheville, N.C.
  • Las Vegas-Henderson-Paradise, Nev.
  • Bend-Redmond, Ore.
  • Charleston-North Charleston, S.C.
  • Nashville-Davidson-Murfreesboro-Franklin, Tenn.
  • Provo-Orem, Utah

In February, home prices saw the strongest annual gains on record, which, when combined with a sharp rise in mortgage rates, made it the most difficult to buy a home in fifteen years!

The report from Black Knight shows that home prices rose again in February, even as interest rates kept rising. This is despite the fact that home prices rose 19.6% from a year ago, even though interest rates kept going up.

Top 10 markets for annual home price appreciation

  1. Tampa, Florida (33.2 percent)
  2. Austin, Texas (33.0 percent)
  3. Raleigh, North Carolina (32.8 percent)
  4. Phoenix, Arizona, (32.0 percent)
  5. Nashville, Tennessee (31.5 percent)
  6. Jacksonville, Florida (29.5 percent)
  7. Orlando, Florida (28.6 percent)
  8. Las Vegas, Nevada (28.6 percent)
  9. Miami, Florida (27.9 percent)
  10. San Diego, California (27.3 percent)

Tampa, Jacksonville, Orlando, and Miami were all in Florida, where four of the top 10 fastest-growing cities were. But Black Knight said that the affordability crisis is worse in western coastal markets. People in Los Angeles, San Jose, San Diego, and San Francisco now have to pay more than half of the median income each month to pay for an average-priced home (50.9 percent). From 1995 to 2003, U.S. home buyers only had to spend 25.1 percent of the average income on mortgage payments for the average-priced home. That’s now 29.1% for the whole country in March.

National payment-to-income ratio

Share of median income needed to make the monthly principal and interest payment on the purchase of the average-priced home using a 20 percent down 30-year fixed rate mortgage at the prevailing interest rate. Source: Black Knight Mortgage Monitor.

The company called Black Knight said that 82 of the 100 largest U.S. markets are now less affordable than their long-term benchmarks, up from just six at first. When payment-to-income ratios rise above 21%, that usually helps to slow down the housing market, but it’s not always true.

It’s still growing, even though it’s the most affordable in 15 years, Black Knight said. Researchers at the Federal Reserve Bank of Dallas said last week that rising home prices may have caused investors to be “fearful of missing out,” which may have led to a price correction.

Distressed properties haven’t filled the gap in the inventory.

Some experts had thought that many people who put their homes on the market would sell them.

Black Knight says that so far, about 925,000 of the 8.1 million homeowners who were in forbearance have put their homes on the market, which is a lot. During the pandemic, that led to 40,000 sales a month. But those sales haven’t filled the inventory gap, and they’ve been going down in recent months.

Status of loans in forbearance as of March 22, 2022. Source: Black Knight Mortgage Monitor.

Once forbearance programs were over and mortgage payments were put on hold, people who had their mortgage payments put on hold might put their homes up for sale.

About 744,000 loans were still in forbearance as of March 22. Another 404,000 homeowners who had their forbearance programs end were delinquent on their loans and looking into “loss mitigation” options with their lenders, like mortgage modifications, to avoid foreclosure.

Some 272,000 people, most of whom were already behind on their payments before the pandemic, are still behind on their payments even though they’ve tried both forbearance and loss mitigation.

In the last month, 74,000 more homeowners have been put into foreclosure, which is 6% more than a month ago. The number of foreclosure starts fell to 25,000, which is below the level before the housing crisis.

Mortgage delinquencies rose by 1.8 percent in February, but the national rate of delinquency stayed close to pre-pandemic levels, even though the rate of delinquency rose. People have expectations of taking advantage of this potential Distressed market, however the data and the value of real estate far overrides any delinquency rates that could plague the market!

  • According to the Black Knight HPI, https://www.blackknightinc.com/data-report home prices rose 1.84% in February – nearly four times the 25-year average for the month – and the 14th month of the pandemic to see greater than 1% monthly growth
  • The average home has now increased in value by more than 34% since February 2020, with appreciation continuing to reaccelerate after a brief slowdown last fall
  • Each of the 100 largest U.S. markets experienced double-digit annual home price growth in February 2022, with three-quarters of those markets seeing continued acceleration of appreciation
  • Home price growth is reaccelerating even as interest rates continue to climb, with rates rising nearly one-third of a percent in February and more than 1.25% since the start of the year through late March
  • As a result, affordability is now at its lowest point on record outside of 2004-2007, with the monthly principal and interest (P&I) payment for the average-priced home purchase up $329 (+24%) year-to-date
  • It now takes 29.1% of the median household income to make that P&I payment, up from 19.3% just 15 months ago and a full 4 percentage points more than the 1995-2003 long-term average
  • 82 of the 100 largest U.S. markets are now less affordable than their long-term benchmarks, up from six at the start of the pandemic
  • In recent years, a payment-to-income ratio above 21% has worked to cool the housing market, but record-low inventory continues to fuel growth even in the face of the tightest affordability in 15 years

JACKSONVILLE, Fla. – April 4, 2022 – 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. This month’s report examines the continuation of record-breaking home price growth – even with interest rates rising sharply – and the mounting affordability pressures resulting from these competing dynamics. According to Black Knight Data & Analytics President Ben Graboske, February 2022 saw the largest annual home price gains on record.

“Home prices grew by 1.84% in February – nearly four times the 25-year average for the month – and they did so while interest rates continued to climb throughout the month,” said Graboske. “The month’s 19.6% year-over-year growth marked the highest annual rate of appreciation on record, with the average home having now increased in value by more than 34% since February 2020, just prior to the pandemic. After a brief cooling last fall, appreciation has been reaccelerating for the last four months. Indeed, a full three-quarters of the 100 largest U.S. markets – all 100 of which registered double-digit annual appreciation in February, it should be noted – are seeing reacceleration of home price growth. And that is all while interest rates climbed nearly one-third of a percent in February and are now up more than 1.25% since the start of the year.

“This combination of accelerating growth and sharply rising interest rates has resulted in the tightest affordability in 15 years. In fact, outside of the skewed 2004-2007 market, the 29.1% of median income now required to make the P&I payment on the average-priced home bought with 20% down is the highest share in 25 years. Entering the year, a prospective homebuyer who could budget a $1,700 monthly P&I payment – roughly the amount required to buy the average home today, excluding taxes and insurance – could afford a $497,000 house. With Freddie Mac reporting the average 30-year rate at 4.42% on March 24, that same borrower can now afford less than $425,000. The average P&I payment has increased 24%, or approximately $329 per month, while at the same time, the average homebuyer’s buying power has dropped by 15%. In the recent past, a payment-to-income ratio above 21% has worked to cool the housing market and regulate prices, but today’s record-low inventory continues to fuel significant growth even in the face of the tightest affordability in 15 years.”

As the current inventory crisis is key to these unprecedented housing market conditions, this month’s Mortgage Monitor also looks at what many had thought might serve as a release valve to the current shortage – namely potentially hundreds of thousands of homeowners coming out of forbearance listing their homes for sale as a resolution. The report finds that, of the 8.1 million homeowners who had been in forbearance at some point during the pandemic, there have been 2.3 million (28%) liquidations thus far. Of these, 925,000 have paid off their loans in full through the sale of their home. While this has worked out to an average of 40,000 such sales per month during the pandemic, it has not filled the inventory gap and has been trending downward in recent months. Less than 750,000 loans remain in active forbearance, with another 400,000 that are no longer in forbearance but still involved in active loss mitigation efforts. Recent post-forbearance liquidations have leaned more heavily toward cash-out refinances, with homeowners perhaps seeking to reset themselves financially.

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.