February 2022 saw the largest annual home price gains on record in America, according to Black Knight Data & Analytics.
Home prices grew by 1.84% in February – nearly four times the 25-year average for the month – and they did so while interest rates continued to climb throughout the month.
The February outcome meant that annual home price inflation in the US is currently 19.6%, the highest annual rate of price appreciation on record.
The average home has now increased in value by 34% since February 2020, just prior to the pandemic.
Three-quarters of the 100 largest US markets are seeing reacceleration of home price growth, despite interest rates increasing by 1.25% since the start of the year.
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82 of the 100 largest U.S. markets are now less affordable than their long-term benchmarks, up from six at the start of the pandemic
"This combination of accelerating growth and sharply rising interest rates has resulted in the tightest affordability in 15 years,” said Black Knight president Ben Graboske.
“In fact outside of the skewed 2004-2007 market, the 29.1% of median income now required to make the principal and interest payment on the average-priced home bought with 20% down is the highest share in 25 years.
“Entering the year, a prospective homebuyer who could budget a $1,700 monthly P&I payment – roughly the amount required to buy the average home today, excluding taxes and insurance – could afford a $497,000 house.
“With the average 30-year rate at 4.42% on March 24, that same borrower can now afford less than $425,000. The average P&I payment has increased 24%, or approximately $329 per month, while at the same time, the average homebuyer's buying power has dropped by 15%.”
Graboske noted that in the recent past a payment-to-income ratio above 21% worked to cool the housing market and regulate prices.
“But today's record-low inventory continues to fuel significant growth even in the face of the tightest affordability in 15 years," he stated.
Black Knight Inc. is a software, data and analytics company that drives innovation in the mortgage lending and servicing and real estate industries, as well as the capital and secondary markets.
