Home prices have risen 42% since the beginning of the pandemic and have gained 9% in value since the first of the year, with equity reaching another all-time high, according to Black Knight’s latest Mortgage Monitor Report.
Black Knight reported that the annual rate of appreciation dropped slightly to 19.9% in April, down from an upwardly revised 20.4% for March. Despite this, rising prices and interest rates have brought about the worst affordability since July 2006.
“While a downward shift from 20.4% to 19.9% annual growth is hardly cause for concern, it’s also likely we’ve not yet seen the full impact of recent rate increases. Rather, April’s decline is more likely a sign of deceleration caused by the modest rate increases in late 2021 and early 2022 when rates first began ticking upwards,” Black Knight Data & Analytics President Ben Graboske.
“That said, price growth thus far has created a very difficult environment for prospective homebuyers to navigate.”
Monthly principal and interest (P&I) on an average-priced home with 20% down is up almost $600 from the beginning of this year (+44%), and $865 (+79%) from the start of the pandemic. That requires 33.7% of median income, just below the 34.1% high of July 2006.
The report is much rosier for homeowners, showing that mortgage holders saw their collective tappable equity rise by $1.2 trillion in Q1 2022 alone.
Mortgage holders have gained $2.8 trillion in tappable equity in the last year (+34%), another all-time high. That works out to $207,000 in equity per borrower.
“It really is a bifurcated landscape – one that grows ever more challenging for those looking to purchase a home but is simultaneously a boon for those who already own and have seen their housing wealth rise substantially over the last couple of years,” Graboske said.
“Depending upon where you stand, this could be the best or worst of all possible markets.”
Homeowners have been shown to tap their equity to build even more wealth by sending their children to college, starting businesses, or investing further in housing. While using equity isn’t risk-free, it can have serious real-world impact on individual and family wealth.
However, while the current market is giving immense leverage to some families, others are finding themselves pushed even farther from the dream of owning a home.
“I don’t think that there’s a viable alternative to homeownership at this point in time,” Cy Richardson, the senior vice president for programs at the National Urban League, told the New York Times. “And it’s an economic disaster for Black families who are unable to achieve homeownership.” White households own homes at a 30 point higher rate than Black households.