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!

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

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.

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.

Studying 100 markets, the paper from the College of Business at Florida Atlantic University analyzed the results. It comes as no surprise that housing demand rose substantially in 2021, with homes across the country selling for much more than previous data would suggest.

Buyers fleeing pricey coastal cities like New York and San Francisco, according to the study, are important contributors to the surge in Florida and elsewhere. Strong sellers markets have also been produced by rising demand and a limited supply.

Eight Florida markets rank among the top 50 nationally in a residential real estate category that, while lucrative for sellers, it doesn’t set well for the long term. The data point? Highest premium paid on an average home sale.

Note these are averages, and not specifically noted, and some may say included in the Jacksonville area. Ponte Vedra, and Ponte Vedra Beach, Florida where “The Players” tournament and “Nocatee” an extremely unique and one of the top twelve sought after communities in the nation! Has it’s own impressive data.

Naples Florida boasts that the Median Listing home price $590,000 up 31% Median home sold price: $545,000! Where as Nocatee Florida Median Listing home price in February 2021 $585,000 and February 2022 sold price is $790,000, approximately a 35% increase. Yes it’s true the St. John’s County Florida is a hot spot, shall I say an independent “Bubble in Northeast Florida” sustainable by their infrastructure, and rarely included separately in data completed by many major resources.

Note Boise, Idaho has seen the highest premium paid on an average home sale, according to Florida Atlantic University’s College of Business, with buyers paying a 78.4% premium over the expected home price.

February 25, 2022

With housing inventory at an all-time low, contract signings decreased 5.7% month over month in January—the third consecutive month for a drop, the National Association of REALTORS® reported Friday. NAR’s Pending Home Sales Index, a forward-looking indicator of home sales based on contract signings, is down 9.5% compared to a year earlier. All four major regions of the U.S. posted annual declines in activity. “Buyers are still having a difficult time finding a home,” says NAR Chief Economist Lawrence Yun.

Yun says home buyers also are contending with escalating home prices and rising mortgage rates, which have increased by more than a full percentage point over the last six months, according to Freddie Mac. “Given the situation in the market—mortgages, home costs, and inventory—it would not be surprising to see a retreat in housing demand,” Yun says.

NAR predicts economic conditions could be volatile in the coming months as the Federal Reserve ends its asset purchase program in March, which could drive up interest rates. Also, Russia’s conflict with Ukraine likely will lead to a crisis in global oil supply and further accelerate inflation, NAR notes. That said, “there’s also the possibility that investors may flee toward safer U.S. Treasury bonds, which may result in temporary short-term relief to interest rates,”Lawrence Yun Chief Economist and oversees the Research group at the NATIONAL ASSOCIATION OF REALTORS®“

Real estate property taxes are critical funding sources for local, state, and federal budgets. The pandemic continues to impact the country, but the average rate of property tax delinquency improved in 2021, falling to 5.9%, according to a new report from CoreLogic, which analyzes national and state real estate property tax delinquency levels spanning from 2011 to 2021.

Still, some areas of the country are seeing an increase in delinquency. “Increases and decreases in tax payment delinquency rates are often early indicators of further economic change,” researchers note.

The states with the highest average property tax delinquency rates in 2021 were:

• Mississippi: 15.6%
• Delaware: 14.5%
• Virginia: 10.5%
• New Jersey and Massachusetts (tied): 10.2%
• Washington, D.C.: 10.1%

On the other hand, the states with the lowest average property tax delinquency rates in 2021 were:

• North Dakota: 1.2%
• Minnesota: 1.3%
• Wisconsin: 1.5%
• Illinois: 1.8%
• Utah: 2.2%

In most U.S. housing markets, owning a home still costs less than renting, despite skyrocketing median home prices, according to a new study. In 58 percent of the 1,154 U.S. counties studied using data from the U.S. Department of Housing and Urban Development and the Bureau of Labor Statistics, owning a median-priced home was more affordable than renting a three-bedroom property on average, according to an ATTOM Data Solutions report released on Thursday, the 6th of January!

Renting, on the other hand, was determined to be the most cost-effective option in the majority of large urban locations. “Home prices are rising faster than both rents and wages, while wages are rising faster than rents. Because of this, property values have reached new highs, as Attom’s Chief Product Officer Todd Teta said in a press release.

Because it still takes up less of their wages, home ownership is still the more affordable option for most employees in a large chunk of the country.” However, growing wages and low mortgage rates have offset the effect of rising property prices in nearly 90% of the country.

Home prices rose an average of 1% across the country last year, but income growth has averaged 8%, and mortgage rates have held steady at approximately 3%.

According to the survey, home prices are rising faster than salaries in much of the country. There are counties with over a million inhabitants that have discovered that renting is more cost-effective than buying in the nation’s most populated metropolis, whereas suburban and rural areas found that buying was their most cost-effective option.

In 35 of the 42 counties with a population of one million or more people or more studied in the survey, renting is more affordable than owning, including Los Angeles, Chicago, Phoenix, San Diego, and Orange County. Houston, San Antonio, Detroit, Philadelphia, and Tampa, according to Attom, are all less expensive for homeowners.

The rental and ownership markets in the South and Midwest are still the most cost-effective, while those in the West and the Northeast are among the most expensive in terms of both renting and owning a property.

TETA forecast that renting will become the most cost-effective alternative, but income growth and low mortgage rates will keep homebuying in favor for the time being. Renters could have a big role in slowing price increases in 2022, as the pattern is gradually shifting.” There’s only a certain amount of price inflation left until renting becomes more affordable,” he asserted.

However, rising incomes and interest rates of approximately 3% are enough to offset recent price increases and keep ownership on the more affordable side compared to renting at least for the time being,” says the report.

I have been asked almost every day for the past three weeks when the Federal Reserve raises interest rates how will it effect mortgage rates. I found that Holden Lewis describes these questions fairly clearly. I will be posting some more about Mortgage rates and some projections soon.

The Federal Reserve is one of many influences on mortgage rates, along with inflation, economic growth and other elements.

The Federal Reserve doesn’t set mortgage rates, but it does affect mortgage rates indirectly.

Mortgage rates are determined by many elements, including the inflation rate, the pace of job creation, and whether the economy is growing or shrinking. The Federal Reserve’s monetary policy is a factor, too, and is set by the Federal Open Market Committee. Click here to see current mortgage rates

What the Federal Reserve does

The Federal Reserve is the nation’s central bank. It guides the economy with the twin goals of encouraging job growth while keeping inflation under control.

The FOMC pursues those goals through monetary policy: managing the supply of money and the cost of credit. Its main monetary policy tool is the federal funds rate, which is the interest rate that banks charge one another for short-term loans. Although there’s no such thing as “federal mortgage rates,” the federal funds rate influences interest rates for longer-term loans, including mortgages.

The FOMC meets eight times a year, roughly every six weeks, to tweak monetary policy. Most meetings result in no change to the federal funds rate. At the conclusion of each meeting, the committee releases a statement explaining its reasoning. Three weeks later, the meeting’s minutes are released, serving Fed nerds even more details.

Do mortgage rates follow Fed rates?

The Fed and the mortgage market move like dance partners: Sometimes the Fed leads, sometimes the mortgage market leads, and sometimes they dance on their own.

The federal funds rate and mortgage rates usually move in the same direction. But it’s hard to say whether mortgage rates follow the Fed’s actions or the other way around

The FOMC prefers to give investors a heads-up whenever it plans to raise or cut short-term interest rates. Members of the committee advertise their intentions by sprinkling hints into their public speeches. By the time the committee meets, there’s usually a consensus among investors as to whether the Fed will cut rates, raise them or keep them unchanged. As that consensus solidifies before an FOMC meeting, mortgage rates usually drift in the direction that the Fed is expected to move. Often, by the time of the meeting, mortgage rates already reflect the expected rate change.

At the same time, mortgage rates move up and down daily in reaction to the ebb and flow of the U.S. and global economies, which are the same developments that the Fed responds to. Occasionally, the Fed and mortgage rates move in opposite directions.

What is the current federal funds rate?

The target federal funds rate has been a range of 0% to 0.25% since an emergency rate cut on March 15, 2020. The emergency was the COVID-19 pandemic and the disruption in economic activity that resulted.

“The effects of the coronavirus will weigh on economic activity in the near term and pose risks to the economic outlook,” the rate-setting committee explained.

The Fed began to buy hundreds of billions of dollars’ worth of Treasurys and mortgage-backed securities to keep cash in the financial system and to keep long-term interest rates down.

In its regular meeting ending Dec. 15, 2021, the FOMC said “indicators of economic activity and employment have continued to strengthen” due to progress on vaccinations and strong policy support. It added that a resurgence of COVID-19 cases has slowed the economic recovery.

The central bank reiterated that it aims to achieve an inflation rate of 2% over the long run. Because the inflation rate has exceeded 2% for a few months, the rate-setting committee said the Fed would curtail purchases of Treasurys and mortgage-backed securities. These bond purchases, designed to hold down interest rates, are likely to end in March 2022.

After ending the bond purchases, the Fed is expected to raise the federal funds rate for the first time since 2018. Three or four quarter-point increases are expected, according to the committee’s projections.

Federal funds rate and HELOCs

HELOCs Home Equity Line of Credit.

Although the Fed doesn’t determine mortgage rates, it does have a direct influence on the rates charged on home equity lines of credit, which typically have adjustable rates.

Interest rates on HELOCs are linked to the Wall Street Journal prime rate, which is the base rate on corporate loans by the largest banks. The prime rate, in turn, moves with the federal funds rate.

When the FOMC cuts the federal funds rate, interest rates on HELOCs go down, too. The March 15, 2020, reduction of one percentage point saved $100 a year — or $8.33 a month — on the interest-only payment of a HELOC with a $10,000 balance. It reduced the prime rate to 3.25% from 4.25%.

About the author:Holden Lewis is a mortgage reporter and spokesperson who joined NerdWallet in 2017. He previously wrote for Bankrate. He has written articles about mortgages since 2001. He has been president of the National Association of Real Estate Editors and has won writing awards from NAREE, the Society of American Business Editors and Writers, and the Society of Professional Journalists.