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Homeowner Equity Growth Lowers LTV Ratios Nationwide

Home prices across the United States rose in Q1 at an annualized rate of 12.8%, according to Radian Home Price Index (HPI) data released today by Red Bell Real Estate, LLC, a Radian Group Inc. company.

The Radian HPI also rose 15.3% year-over-year (March 2020 to March 2021), slightly higher than the year-over-year increase of 15.2% recorded last month.

“The first quarter saw a pullback from the record pace of home price appreciation witnessed in recent quarters,” said Steve Gaenzler, SVP of Products, Data and Analytics. “The current measure is still significantly higher than prior years, but new headwinds to affordability and supply are negatively impacting both the ability and willingness to purchase a home. And, while the refinance market is more sensitive to mortgage rate movements, there is little question that higher mortgage payments have started to impact homebuyer confidence as well.

After slowing in appreciation rates in each of the prior five months, home price appreciation increased in March at a faster rate of 12.7% on an annualized basis, an acceleration of home price appreciation above the 11.8% annualized increase in the prior month. Nationally, the median estimated price for single-family and condominium homes rose to $316,872 in March from the $274,978 recorded in March 2021, marking a nearly $42,000 increase in the median home value nationally over the last twelve months.

In Q1 of 2022, home prices rose an annualized 12.8%, representing a large decline from the 17% annualized increase during Q4 of 2021, but remained far above the 9.4% annualized gain in Q1 of 2021.

Supply remains constrained for both distressed and non-distressed properties. While most federal and state foreclosure moratoriums have been lifted, the number of distressed property listings remains near historic lows. This month the count of distressed listings represented just 4.3% of all listings, just slightly above the all-time low of 4.0% recorded a few months earlier.

Strong homeowner equity growth over the last few years has pushed down loan-to-value ratios across the country, providing a non-distressed sale option even to those homeowners that can no longer afford their current property.

In general, the volume of active listings of properties for sale continues to remain at historically low levels In March, the U.S. had just over 770,000 active for-sale listings, slightly higher than the all-time low inventory reported two months ago. Also, last month reported just over 285,000 closed sales transactions, a number far below the 303,000 reported in March 2021.

“In many markets, sales transactions are still closing quickly and listing volumes remain low, but a moderation of home price appreciation rates relative to 2021 is a real possibility,” said Gaenzler.

However, compared to the absorption of listings due to sales, even at the lower sales counts, this represents a higher share of listings. Five years ago, the number of sales represented about 20% of total prior month active listings. Last month, the sales-to-listing ratio rose to 38%, suggesting that relative to the depressed volume of listings, the market is still competitive and buyers’ choices remain limited.

Last month, three regions – the South, Southwest and West – reported faster appreciation rates than the prior month. In the first three months of 2021, all six regional indices recorded positive home price appreciation rates. Compared to Q4 of 2021, all but one region recorded slower home price appreciation.

The South region actually posted a faster annualized rate of appreciation in Q1 of this year than Q4 of 2021. Strong sales continue to support these positive appreciation rates. Nationally, Q1 of 2022 recorded just under 730,000 total closed sales, slightly below the 750,000 record set in Q1 of 2021, and still was the second-strongest Q1 on record.

Likely impacted by seasonal declines in activity, home prices in the Northeast recorded the slowest rate of appreciation in the first quarter of the year. The South and Southwest were the strongest regions in the first quarter, with the South reporting an annualized Q1 appreciation rate of 21%. When evaluated by price points, during the quarter, homes at all price points recorded positive appreciation.

Similar to national numbers, listing activity region-by-region remains far below historic norms. Using the same five-year lookback, the index of regional listing volumes for all but one of our regions stands 40% to 55% lower than March 2017. One region, the Northeast, stood nearly 70% lower in active listings than our baseline. Listing volume remains tight in all regions.

Metropolitan areas did quite well in the most recent quarter. All but two of the 20 largest metro areas —New York, Philadelphia— in the U.S. recorded faster positive price appreciation in Q1 when compared to Q4 of 2021. On a monthly basis, all 20 metros posted faster price appreciation rates in March, than in February.

Not surprisingly, Days on Market (DOM) fell for listed properties in the U.S. and in the largest metropolitan areas. Nationally, DOM remained near all-time lows. In March, the average Days on Market for closed sales was 75 days. That level, while higher than the all-time low of 67 days, was actually lower than the 76-days monthly averages across all twelve months in 2021, and was more than a week shorter than any prior March on record.

To read the full report, including charts and methodology, click here.

About Author: Demetria Lester

Demetria C. Lester is a reporter for DS News and MReport magazines with more than eight years of writing experience. She has served as content coordinator and copy editor for the Los Angeles Daily News and the Orange County Register, in addition to 11 other Southern California publications. A former editor-in-chief at Northlake College and staff writer at her alma mater, the University of Texas at Arlington, she has covered events such as the Byron Nelson and Pac-12 Conferences, progressing into her freelance work with the Dallas Wings and D Magazine. Currently located in Dallas, Texas, Lester is an avid jazz lover and likes to read. She can be reached at [email protected].

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