Home prices fell for the sixth straight month as the annual growth rate slid to its lowest level in over two years, according to the Black Knight Mortgage Monitor Report.

  • M-O-M: In December, Home prices fell 0.45% from November, this is slightly higher than the 0.43% decline in the last report and is now the sixth straight month of declines.
  • Y-O-Y: Home prices are now up 5.0% compared to December 2021, this is the slowest home price growth rate since June 2020 and is only 0.4% off the 30-year average.

Housing Peak. Home prices are now down 5.0% from the June peak and Black Knight predicts that annual home price growth could go negative within the next three months.

Productive January. Many have predicted that December could be the housing bottom and January activity could back that up. Purchase rate locks rose by 64% from the first to the fourth week of January, the biggest increase in the past five years.

  • Purchase locks in the week ending January 21st made up 81.7% of rate locks, with cash-out refis making up 13.7% and rate/term only at 4.6%.
  • Rate lock volume is still well down from pandemic levels and is still off 13% from pre-pandemic levels.

Affordability Concerns Continue. While affordability has improved we still have a way to go before returning to a more normalized level. The national payment-to-income ratio hit a 40-year high in October at 38.4%. The good news is the PTI has fallen over three percentage points to 35%. Unfortunately, this is still a full percentage point higher than the ’08 peak.

  • The monthly mortgage payment required to purchase the average-priced home (assuming 20% down) has dipped by more than $200 since October. Unfortunately, it remains $600 (+41%) higher than it was at the same time last year.

Analysis. Ben Graboske, Black Knight Data & Analytics President, said things are looking up in January but we still have a ways to go to return to normal. “We can see definite signs of a January uptick in purchase lending on lower rates and somewhat lower home prices…But affordability still has a stranglehold on much of the market, with the monthly mortgage payment on the average-priced home more than 40% higher than it was this time last year. It’s also important to keep January’s surge in purchase activity in perspective. While up, purchase locks were still running roughly 13% below pre-pandemic levels for the last full week of the month.”

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