November 2016 - End of the Road?

TheMReport — News and strategies for the evolving mortgage marketplace.

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TH E M R EP O RT | 51 O R I G I NAT I O N S E R V I C I N G A NA LY T I C S S E C O N DA R Y M A R K E T ANALYTICS THE LATEST Home Prices Rise Up in July New York and Minnesota see highest spikes. T he Data & Analytics division of Black Knight Financial Services, Inc. recently released its latest Home Price Index (HPI) report, based on July 2016 residential real estate transactions. The report states that U.S. home prices are up 0.4 percent for the month as well as up 5.3 percent year-over-year. At $266,000, the U.S. HPI has risen over 33 percent from the market's bottom and is now within just 0.8 percent of a new national peak. Specifically, New York and Minnesota led home price gains among the states, seeing 1.1 and 1 percent growth for the month, respectively, while Missouri was the only state to see home prices decline. This rate fell 0.1 percent. The report also states that Albany, Oregon, led metro-area growth at 1.3-percent appreciation. In contrast, New York state metro- areas reportedly accounted for six of the top 10 biggest monthly movers. Black Knight reports that San Jose, California continued to back away from its May 2016 peak, with prices falling another 0.5 percent in July. Home prices in Portland, Oregon, saw the fastest rate of appreciation among the 40 larg - est metros, and Seattle increased more than 10 percent since the start of the year. Additionally, home prices in nine of the na - tion's 20 largest states and 14 of the 40 largest metros hit new peaks in July. The report states that each month the Black Knight HPI reports five price levels (quintiles), along with REO discount rates, for 18,000-plus U.S. ZIP codes. Findings are available with or without seasonal adjustments, although all numbers that follow have not been seasonally adjusted. The Black Knight HPI utilizes repeat sales data from the nation's largest public records data set, as well as its market-leading, loan-lev - el mortgage performance data, to produce one of the most complete and accurate measures of home prices available for both disclosure and non-disclosure states. Non-disclosure states do not include property sales price infor - mation as part of their publicly available county recorder data. Black Knight is able to obtain the sales price information for these states by combining and matching re - cords across its unique data assets. Many Large Markets Show High Mortgage Stress Levels Homeowners devote over 28 percent of their income to mortgage payments. I n June, all 33 bank holding companies reviewed as part of the Federal Reserve's an- nual stress testing made the grade. Some housing markets in the United States, however, are not doing so well with a different type of stress test. Twenty of the largest 100 markets in the United States have "mortgage stress," meaning homeowners' mortgage repayment is more than 28 percent of their gross income on average in those markets, according to data from "Mortgage stress is present throughout the nation, but there are some major U.S. cities that have higher mortgage stress rates than others," the report stated. "Interest costs and the prices of homes are inflating, and salaries and wages are struggling to keep up." To calculate which markets are experiencing mortgage stress, used the median home value, median household income, and annual mortgage repayments in the top 100 most populated U.S. cities, and then used that data to find the pro - portion of mortgage payments in those markets. For example, a homeowner with an annual income of about $51,000 with a $265,000 mortgage who was put- ting 28 percent of their income to- ward mortgage repayments would be paying $1,183 monthly. The average mortgage repay- ment in proportion to income for the top 100 markets was 20.9 percent, according to California was the state with the most cities that have mortgage stress; 10 of the top 20 markets with mortgage stress were located in the Golden State. San Francisco was the top market for mortgage stress, with 61.5 percent of the city's median household income going toward the average mort - gage repayment. Los Angeles and Oakland were second and third at 50 percent and 49.7 percent, respectively; the highest-ranking non-California market was New York at 47.7 percent. The markets with the least amount of mortgage stress were typically located in the Midwest. Detroit was the market with the lowest proportion of income to repayments with 6.1 percent, fol - lowed by two Ohio cities (Toledo, 7.26 percent, and Cleveland, 8.5 percent), Memphis (8.63 percent), and Fort Wayne, Indiana (9.3 percent). "Mortgage stress is present throughout the nation, but there are some major U.S. cities that have higher mortgage stress rates than others."

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