As rates generally declined, prepayment activity and refinance originations rose in six of the past seven months. Candidates for refinance rose to 9.46 million in August and peaked at an all-time high of 11.7 million in the first week of September.
“Despite falling interest rates and steadily improving affordability over the preceding eight months, annual home price growth held flat in August at 3.8% after rising for the first time in 17 months in July,” Ben Graboske, president of data and analytics at Black Knight, said in a press release. “It remains to be seen if this is merely a lull in what could be a reheating housing market, or a sign that low interest rates and stronger affordability may not be enough to muster another meaningful rise in home price growth across the U.S. That the strongest gains in — and strongest levels of — affordability were in August and early September could bode well for September/October housing numbers.”
Housing affordability hit a nine-year low in November 2018, according to Black Knight. Mortgage rates inched close to 5% and the average-priced home required a 23.7% share of median income to make the principal and interest payments.
“That payment-to-income ratio is now 20.7%, which is the second lowest it has been in 20 months, behind only August of this year, and about 4.5% below the long-term, pre-crisis norm,” Graboske said. “To help quantify the boost this has given to homebuyers, consider that today’s prevailing 30-year rate has cut the monthly P&I payment to purchase the average-priced home by 10% — about $124 per month — from November. Put another way, the decline in rates since November has been enough to boost buying power by $46,000 while keeping monthly P&I payments the same.”