Although the average U.S. home value increased by $13,500 from last year, the historically low interest rates that have become the new normal have resulted in the monthly protection and indemnity insurance on the median-priced home is one dollar less than it was a year ago.
According to a new analysis from Black Knight Financial Services (BKFS), rising interest rates could create new problems for both home price appreciation and the concept of affordable homeownership.
“Even taking into account the fact that affordability can vary—sometimes significantly—across the country based upon the different rates of home price appreciation we’re seeing, that’s a pretty incredible balancing act between interest rates and home prices at the national level,” said Black Knight Data & Analytics Executive Vice President Ben Graboske. “Of course, if and when rates rise, that will change. Right now, it takes 20 percent of the median monthly income to cover monthly payments on the median-priced home, which is well below historical norms. A 50 basis points increase in interest rates would be equivalent to a $17,000 jump in the average home price, and bring that ratio to 21.5 percent. This increase is still below historical norms, but puts more pressure on homebuyers.”
Black Knight also found that while Oregon, Washington and Colorado continue to see the highest levels of home price appreciation among the states, Oregon and Washington are only seeing a 1.5 percent year-over-year appreciation while Colorado’s rate of appreciation is one percent lower from last year. Furthermore, Black Knight found that overall condominium price growth is appreciating at a slower rate than single-family residences for the first time since the housing recovery began—and even a condo-heavy market like Florida has appreciation rates that are roughly half the rates for single-family homes.
