March 7th, 2022 1:38 PM by Richard Sardella MLO.100007700/NMLS 233568
Tappable Home Equity Rises 35% to nearly $10 Trillion:
According to Black Knight, Inc's Mortgage Monitor Report, homeowners’ tappable equity – the amount available for a mortgage-holder to access while retaining at least a 20% equity stake in their home – has hit yet another record high.
According to Black Knight Data & Analytics President Ben Graboske, Q4 2021’s nearly half-billion-dollar increase in tappable equity has also resulted in the lowest total market leverage on record.
“Home price appreciation over the course of 2021 was unlike anything that’s come before, and the incredible growth we’ve seen in homeowner equity is testament to that fact,” said Graboske. “The aggregate total of $9.9 trillion represents an astounding 35% annual growth rate – which works out to an increase of $2.6 trillion in tappable equity in a single year. That’s $185,000 available to the average mortgage holder before hitting a maximum combined loan-to-value ratio of 80%. In fact, it’s driven total market leverage down below 45% for the first time on record. And while we saw the rate of home price growth begin to slow beginning in July 2021, that trend has since reversed – as has the modicum of improvement we’d started to see in inventory levels – making even further gains likely, at least in the near term. Both the Black Knight HPI and our Collateral Analytics daily tracking data showed home price growth reaccelerating as the year came to a close. In fact, at a time of the year that typically sees little to no price movement – home prices increased by 0.84% last month, marking the largest December price growth on record.
How Rates Move:
Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I’m among few mortgage professionals who have access to live trading screens during market hours.
Rates Currently Trending: Neutral
Mortgage rates are moving slightly higher today. The MBS market improved by +34 bps last week. This was enough to decrease mortgage rates or fees. The market experienced high volatility last week.
This Week's Rate Forecast: Neutral
Three Things: These are the three areas that have the greatest ability to impact rates this week. 1) Geopolitical, 2) Inflation and 3)Treasury Sales
1) Geopolitical: Geopolitical concern remains the primary focus of long bond traders and this week will continue to be dominated by the news and events of Ukraine/Russia. Of note is the prospect of the U.S. banning Russian Oil and any possible agreement via negotiations.
2) Inflation: Consumer Prices are expected to rise from 7.5% to 7.9%, this is the last major inflation report prior to the FOMC decision and follows a strong jobs report last Friday. The higher this number is the more weight bond traders will give to future fed action.
3) Treasury Sales: We have two important auctions this week with our 10 year note and 30 year bond. The bond auction will get more weight and direct correlation to your backend pricing.
This Week's Potential Volatility: High
This week could go either way depending on the situation in Europe. Volatility is high due to geopolitical fears and inflation.
If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.
Richard Sardella has been actively managing and providing services in the mortgage industry for over 30 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.
All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.
MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.