Home Prices Saw Largest Ever Annual Gains In February 2022

Home prices rose 1.84% in February and 19.6% year-over-year, the largest annual gains on record, according to Black Knight’s Monthly Mortgage Monitor Report.

The 1.84% increase is nearly four times the 25-year average for the month and marks the 14th consecutive month of greater than 1% price growth. The average home has now increased in value by more than 34% since February 2020.

All of the markets analyzed by Black Knight experienced double-digit annual home price growth in February 2022. Three-quarters of them saw continued acceleration of appreciation.

Home price growth cooled off briefly last fall but reaccelerated in winter despite rising rates. Affordability is now at its lowest ever point outside of 2004-2007. The monthly principal and interest payment for an average-priced home is up 24% year-to-date.

It now takes 29.1% of the median household income to that payment, up from 19.3% 15 months ago and 4 percentage points more than the 1995-2003 long-term average.

Americans are considered housing cost-burdened when they spend 30% or more of their income on housing.

“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,” said Black Knight Data & Analytics President Ben Graboske.

“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.”

Fannie Mae predicts the median existing-home price in 2022 will jump from $355,000 to $384,000 in 2022, an 11.2% YOY increase.

But a recent report from Redfin says the housing market is showing the first signs of cooling as buyers are priced out by rapidly rising prices.

“Homebuyers may not feel like the market has gotten any easier,” Redfin Chief Economist Daryl Fairweather said. “But there are early indicators that the market is turning, and we expect the softening to become more apparent in the coming weeks, eventually causing home-price growth to slow. We’ll be watching closely to see whether the market slows from 100 miles per hour to 90 or 100 miles per hour to 75.”