Data & Analytics at Black Knight, Inc. (NYSE:BKI) recently released the Mortgage Monitor Report. A comprehensive dataset of mortgages, real estate sales, and public records is a key component of the report. Affordability remains a significant challenge in the market, even though home prices and interest rates have declined from 2022 peaks. In response to this affordability challenge, Black Knight Data & Analytics President Ben Graboske explains that borrowers are increasingly purchasing points up front in order to lower their first-lien interest rates.
According to Graboske, there are signs of an uptick in purchase lending in January as a result of lower rates and somewhat lower prices, based on Optimal Blue data. During the first four weeks of January, locks on purchase mortgages climbed 64%. Home prices have come off their peaks and interest rates have declined a full point – but it’s not as simple as that.
Black Knight Home Price Index data shows that home values declined for the sixth consecutive month in December, and prices nationwide are now 5.3% off their June 2022 highs. Yet affordability remains a stumbling block for many homebuyers, with mortgage payments on the average-priced home over 40% higher than last year. The surge in January’s purchase activity should also be kept in perspective. The purchase lock rate for the last week of the month was roughly 13% below pre-pandemic levels, although it was up from the previous week.
During the housing boom of the pandemic era, borrowers paid 0.5 points with a corresponding costs of around $1,500. Today, those costs are at $4,300 and as high as $6,900 last year. An average of 1.16 points were paid by purchase borrowers, who account for 81% of new rate locks. Those looking to take cash out of their homes paid an average of 2.06 points, nearly double that amount.