Monday, October 07, 2019

Black Knight Mortgage Monitor for August: National Delinquency Rate near Series Low

by Calculated Risk on 10/07/2019 08:55:00 AM

Black Knight released their Mortgage Monitor report for August today. According to Black Knight, 3.45% of mortgages were delinquent in August, down from 3.52% in August 2018. Black Knight also reported that 0.48% of mortgages were in the foreclosure process, down from 0.54% a year ago.

This gives a total of 3.93% delinquent or in foreclosure.

Press Release: Black Knight Mortgage Monitor: Lower Interest Rate Environment Boosts Home Affordability to Nearly Three-Year High; Home Price Growth Flat in August

Today, the Data & Analytics division of Black Knight, Inc. released its latest Mortgage Monitor Report, based upon the company’s industry-leading mortgage performance, housing and public records datasets. This month, Black Knight’s analysts examined the impact of recent interest rate declines on home affordability, finding yet another situation where rate shifts in either direction have profound impact. As Black Knight Data & Analytics President Ben Graboske explained, the current lower interest rate environment has provided a boost to potential homebuyers.

“Back in November 2018, we were reporting on home affordability hitting a nine-year low,” said Graboske. “Interest rates were nearing 5%, pushing the share of national median income required to make the principal and interest (P&I) payments on the purchase of the average-priced home to 23.7%. While still below long-term averages, that made housing the least affordable it had been since 2009, spurring a noticeable and extended slowdown in home price growth. In the time since, rates have tumbled and the affordability outlook has improved significantly. That payment-to-income ratio is now 20.7%, which is the second lowest it has been in 20 months, behind only August of this year, and about 4.5% below the long-term, pre-crisis norm. To help quantify the boost this has given to homebuyers, consider that today’s prevailing 30-year rate has cut the monthly P&I payment to purchase the average-priced home by 10% – about $124 per month – from November. Put another way, the decline in rates since November has been enough to boost buying power by $46,000 while keeping monthly P&I payments the same.

“Despite falling interest rates and steadily improving affordability over the preceding eight months, annual home price growth held flat in August at 3.8% after rising for the first time in 17 months in July. It remains to be seen if this is merely a lull in what could be a reheating housing market, or a sign that low interest rates and stronger affordability may not be enough to muster another meaningful rise in home price growth across the U.S. That the strongest gains in – and strongest levels of – affordability were in August and early September could bode well for September/October housing numbers. As such, we’ll be keeping a close eye on the numbers coming out of the Black Knight Home Price Index over the coming months.”
emphasis added
BKFS Click on graph for larger image.

Here is a graph from the Mortgage Monitor that shows the National delinquency rate over time.

From Black Knight:
• The national delinquency rate currently stands at 3.45%, within 0.09% of the record low set in May 2019 and 0.94% below the pre-recession August average of 4.39%

• The month’s relatively flat movement in mortgage delinquencies (-0.15%) is fairly typical behavior for August

• Over the past 18 years, delinquencies have fallen by 0.2% on average for the month, making August the most seasonally neutral month

• In contrast, September tends to see the largest seasonal upward pressure on delinquency rates of any month (+5.2% on average since 2000), so upward movement next month would not be surprising
The second graph shows 90-day defaults vs foreclosure starts: BKFS
• Foreclosure starts hit an 18-year low in August, but defaults have shown signs of upward movement in recent months

• While August’s 85K defaults were 15% below the prerecession (2000-2005) average for this time of year, default volume was up by 6% from the same time last year

• Defaults have been relatively flat year-over-year or up slightly in each of the past five months

• One contributing factor has been the severe early-2018 flooding in the Midwest, with defaults in the region rising by 10% from the year prior » August also saw defaults increase in the south (+8%) and the Northeast (+4.5%)

• Though default activity remains historically low, this is a trend worth watching
There is much more in the mortgage monitor.