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White Paper: ‘Unprecedented Times’ for Housing

Black Knight’s recently released White Paper discusses the impact the spread of COVID-19 has had on the housing and mortgage industries. 

“These are unprecedented times, for the world as a whole and for the real estate and mortgage industries specifically,” said Black Knight CEO Anthony Jabbour. “Given Black Knight’s leadership position in the industry—and our extensive data, research, and analytics capabilities—we felt compelled to assess this situation for our clients and the markets we serve.”

Despite the current state of the market, Black Knight said the mortgage market was on solid ground, and “record-setting,” to begin 2020. 

The national delinquency rate fell to its lowest level on record in January 2020 and the number of non-current loans fell to its lowest level since March 2005. Additionally, serious delinquencies and new defaults hit their lowest point on record in February 2020. 

Historically low mortgage rates led to a refinance surge toward the end of 2019, as the refinancing volume in Q4 2019 hit a 6.5-year high. Cash-out refinances were at a 10-year high, as nearly 600,000 homeowners withdrew $41 billion in equity through refinancing. This is the largest volume since mid-2009, but still less than 0.75% of the total available equity in the quarter. 

However, by the third week of March COVID-19’s impact was felt nationwide. Thirty-eight states are currently under stay-at-home orders. 

Since March 26, more than 10 million Americans have filed for unemployment claims and the U.S. Bureau of Labor Statistics reported the unemployment rate rose to 4.4% on Friday with total employment dropping off by 701,000 in March. 

The reported increase of 0.9 percentage points in March is the largest month-over-month increase since January 1975, when it rose by the same margin. 

“The potential impacts on the real estate and mortgage ecosystem are significant. General uncertainty in the market and among the public could impact not only the willingness of prospective homebuyers to transact but also that of lenders to lend and retain business,” the paper states, adding rising unemployment will impact delinquencies. 

Black Knight’s research adds home-price growth could slow, stall, or possibly reverse course, depending on the severity and length of the economic downturn. 

The report added that if home sales dipped 30% in Q2 2020, that would equate to nearly 500,000 missed transactions—more than 8% of the possible closings for the year. 

If that drop occurs, it would represent more than $150 billion in real estate closings that would not take place in Q2 2020. 

Black Knight said the impact the virus could have on mortgage originations “remains to be seen.” 

“This impact will be the result of several factors, including fewer buyers physically out in the market, as well as fears of recession and economic uncertainty among potential buyers,” the report said. 

The report continued by saying Q2 and Q3 2020 are seasonal peaks for purchase lending, and that a possible 30% decline in purchase lending during the quarter would result in a potential $113 billion education—8% of the expected volume for the year.

About Author: Mike Albanese

A graduate of the University of Alabama, Mike Albanese has worked for news publications since 2011 in Texas and Colorado. He has built a portfolio of more than 1,000 articles, covering city government, police and crime, business, sports, and is experienced in crafting engaging features and enterprise pieces. He spent time as the sports editor for the "Pilot Point Post-Signal," and has covered the DFW Metroplex for several years. He has also assisted with sports coverage and editing duties with the "Dallas Morning News" and "Denton Record-Chronicle" over the past several years.

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