Rising Interest Rates Weigh on Home Values

According to a recent Black Knight report, house prices fell 0.77% between June and July, marking the largest monthly decline since January 2011 and the first monthly drop of any size in 32 months. As mortgage rates continue to rise and weigh on home values, some homeowners have lost wealth. Mortgage rates are now double what they were at the start of this year, and home sales have slowed. However, Ben Graboske, president of Black Knight Data & Analytics, says, “Annual home price appreciation still came in at over 14%, but in a market characterized by as much volatility and rapid change as today’s, such backward-looking metrics can be misleading as they can mask more current, pressing realities.” Roughly 85% of major markets have seen prices come off peaks through July, with one-third coming down more than 1% and about 1 in 10 falling by 4% or more, according to the report. As a result, after gaining trillions of dollars in home equity collectively during the first two years of the COVID-19 pandemic, some homeowners are now losing equity. Declining home values in June and July brought the total amount of tappable equity down 5%, and Black Knight analysts expect the third quarter will show a larger decline. The report also indicates that about 275,000 borrowers who would fall underwater if their homes were to lose 5% of their current value, but even with a universal 15% decline in prices, negative equity rates would still be nowhere near the levels seen during the financial crisis. Source: https://www.floridarealtors.org/news-media/news-articles/2022/09/rising-interest-rates-weigh-home-values