CALCULATEDRISK
Florida has experienced some of the largest inventory gains in recent months
By Bill McBride
ICE Mortgage Monitor: Equity Withdrawals Rose Slightly in Q3 2023, but High Interest Rates Are Compressing Usage by 55%
Intercontinental Exchange, Inc. (NYSE:ICE), a leading global provider of data, technology, and market infrastructure, released its December 2023 ICE Mortgage Monitor Report, based on the company’s industry-leading mortgage, real estate and public records data sets. Rising home prices, though cooling in recent months, have returned total tappable equity to near its 2022 peak. This has implications for both equity lending as well as performance-related risk among active mortgages, as ICE Vice President of Enterprise Research Andy Walden explains.
“Despite the resurgence in tappable equity among U.S. mortgage holders, elevated interest rates are making homeowners reluctant to extract that wealth,” Walden said. “Indeed, in recent quarters, equity withdrawal rates have been running at less than half their long-run averages. Mortgage holders extracted a mere 0.41% of tappable equity available at the beginning of Q3. That’s some 55% below the average withdrawal rate seen in the 12 years leading up to the Fed’s most recent tightening cycle. That’s equivalent to $54 billion – $250B over the last 18 months – in ‘missing’ withdrawals that might have otherwise stimulated the broader economy.”
Along with other factors, rising equity levels are contributing to low default and foreclosure activity in today’s market. As Walden notes, any specter of a potential wave of foreclosures must be tempered by a recognition of borrowers’ generally strong equity positions – including the most seriously delinquent among them.
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House Prices Increased in October
Note: The ICE (formerly Black Knight) House Price Index (HPI) is a repeat sales index. ICE reports the median price change of the repeat sales. Here is a graph of the ICE HPI. The index is up 4.6% year-over-year.
• Home prices continued sending mixed signals in October
• Prices rose +0.17% in the month to a new seasonally adjusted high, bringing the annual home price growth rate to +4.6%, from a revised +4.2% in September
• However, on a non-adjusted basis, prices fell by -0.26% in October – the largest price decline since December 2022 – following a downwardly revised -0.12% in September, both weaker than 25-year same-month averages
• Even with 30-year rates easing somewhat in November, slightly improving affordability, housing demand remains compressed
• October’s +0.17% seasonally adjusted gain is equivalent to a +2.0% seasonally adjusted annualized rate (SAAR) suggesting that, while momentum will likely continue to carry annual home price growth higher in November, if recent price weakness continues, we could see the annual home price growth rate begin to ease as we move into early 2024
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Inventory of Homes for Sale Increased
Here are a couple of graphs on inventory showing some regional differences. Austin – the city that has seen the largest price declines – has more for sale inventory than prior to the pandemic. Several other cities are close to pre-pandemic levels.
And on Florida inventory:
Florida has experienced some of the largest inventory gains in recent months
• In fact, six of the nine markets seeing the strongest inventory growth over the past three months – Palm Bay (+22pp), Lakeland (+21pp), Tampa (+19pp), Cape Coral (+18pp), North Port (+16pp) and Orlando (+14pp) – are located in the Sunshine State
• Inventory in Lakeland is now 15% above 2017-2019 averages, surpassing Austin for the largest surplus of homes for sale compared to prepandemic levels
• While Miami has also shown inventory improvements it continues to have the deepest inventory deficit in the state with 42% fewer homes for sale compared to 2017-2019 same-month averages, in line with the national average
• Florida will be worth watching in coming months to determine if rising inventory levels lead to softening prices
Mortgage Delinquencies Decreased Slightly in October
Here is a graph on delinquencies from ICE. Overall delinquencies decreased in October but are just above the record low in March.
• The national delinquency rate fell 3 basis points (bps) to 3.26% in October, a 9 bps improvement year over year
• That’s 61 bps lower than before the pandemic and 119 bps below the five-year October average heading into the Great Financial Crisis
• Serious delinquencies (90+ days past due) fell to 447K, the lowest level since 2006
• The population of loans 30-days late also declined, marking the first such improvement in five months
• 60-day delinquencies rose 3% in the month, but remained 18% below prepandemic levels