Home prices (Image: Shutterstock)

Home price appreciation has cooled across much of the U.S., Black Knight’s data and analytics division reported Monday, based on data through the end of June.

The firm’s latest Mortgage Monitor Report examined the slowdown in the rate of home price rises between March and May, and gauged how that along with slightly lower interest rates have affected home affordability.

Ben Graboske, executive vice president of Black Knight’s data and analytics division, noted in a statement that what was on view was not a matter of home prices falling, but rather a slowing in their continuing increase.

(Related: The Most Googled Financial Questions, by State)

“In May — typically one of the strongest months of the year for home price growth —every state in the nation saw home prices increase,” Graboske said. “However, the average monthly gain in value of less than 1% was the lowest for any May in the last four years.

“In addition, the annual rate of appreciation declined each month from March through May, the first three-month slowdown in almost four years.”

The report found that 32 states and 33 of the 50 largest metropolitan areas, experienced slowdowns in appreciation over the same period.

Still, the annual rate of home price growth remains historically high at 6.3%, about 2.5 percentage points above long-term norms, Graboske said. For more than six years, home price appreciation has remained stubbornly above the 25-year average.

“The question now is whether tightening affordability will end that streak and if more deceleration is on the horizon,” he said.

According to Graboske, the slowdown of home price gains and slight reprieve in rising interest rates have combined to stabilize affordability in recent months.

As rates have edged down from 4.7% in late May to 4.5% in mid-July, the monthly principal and interest payment to purchase the average home has increased by only $4 per month, well below the $138-per-month increase during the first five months of 2018.

Even so, the $1,213 in principal and interest per month a buyer needs to purchase the average home stands near a post-recession high. “While that represents a nearly $500 per month increase from the bottom of the market in 2012, it’s important to keep in mind that it’s still roughly 13% less than was required back in 2006,” Graboske said.

Black Knight’s report also examined how rising short-term interest rates have affected holders of outstanding adjustable-rate mortgages. It found that 1.7 million ARMs borrowers have experienced monthly mortgage payment increases averaging $70 over the past 12 months.

The statement noted that this subset of borrowers had benefited from downward reductions in their rates and payments following the financial crisis, but that was no longer the case.

Increases to both the LIBOR and constant maturity Treasury rates have resulted in the average rate on a post-reset ARM rising by more than 0.5% over the past 12 months and nearly 0.75% over the past two years, pushing the average post-reset ARM interest rate to more than 4.5%.

This has not led to any measurable increase in post-reset ARM delinquencies, but ARM loans are now prepaying at a 70% higher rate than their fixed-rate counterparts over the past 12 months.

According to the report, this trend may continue as an estimated 1 million borrowers would face an additional payment increase upon their next reset if index values were to hold steady at current rates.

Other Key Results

Black Knight reported foreclosure starts fell by 3.1% in June, the lowest single-month total in more than 17 years. Active foreclosures also continued to decline, dropping below 300,000 for the first time in almost 12 years.

The inventory of loans in active foreclosure is down by 30% over the past 12 months.

June delinquencies ticked seasonally upward, but were 1.6% below year-ago levels.

Ninety-day delinquencies hit a post-recession low after having risen following the 2017 hurricane season. Following are the five states with the highest rate of seriously delinquent loans — those 90 days or more past due:

  • Mississippi
  • Florida
  • Louisiana
  • Alabama
  • Arkansas

Prepayment activity rose in June as home sales reached their typical early-summer peak.

(Related: The Most Googled Financial Questions, by State)