The interest-rate-fueled reheating of the housing market we covered in the December 2019 Mortgage Monitor report continued – and accelerated – in January.
Based on the latest data from the Black Knight Home Price Index, home prices in January rose 5.1% from one year ago, the first time annual home price growth has passed the 5% mark since November 2018. Somewhat coincidentally, that month also marked the recent high point in mortgage interest rates, and home price growth continued to slow for months.
The annual home price growth rate has since accelerated by 1.3% over the past five months, 0.75% of which has come in the past two months alone. That is the strongest such acceleration we’ve seen in more than 6.5 years.
With 30-year fixed interest rates falling below 3.5% in recent weeks, housing is now the most affordable it’s been in more than two years. As of February 2020, 20.5% of the median household income is required to make principal and interest payments on the median-priced home purchase, assuming a 20% down payment. That’s down from 23.6% in late-2018, and far below the 34.4% it took at the height of the housing bubble in 2006.
The last time housing was this affordable home price growth was over 6.5% on an annual basis, suggesting we may well see continued heating of the market if rates remain low in coming months. Black Knight will continue to monitor and report upon home price movements and how they impact affordability levels.
For more analysis of housing and mortgage data, be sure to download our monthly Mortgage Monitor report. The January 2020 edition will be available on March 2nd.