CALCULATEDRISK
By Bill McBride
Press Release: ICE Mortgage Monitor: Home prices cool heading into the Spring home-buying season, led by condos
- Home prices are softening across the country: Annual home price growth slowed to +2.7% in February, with early data for March showing further cooling to +2.2%.
- Condo prices decreased annually for the first time in more than a decade: Condo prices lagged single family price growth in 97 of the 100 largest U.S. markets and were down in more than a third of those markets.
- Florida condo prices dropped the most: Markets such as North Port (-9.4%) and Lakeland (-7%) saw significant YoY price slips, with other markets, including Tampa (-5.8%), Orlando (-4.4%), Jacksonville (-4.4%) and Miami (-2.8%) not too far behind.
- Florida’s homeowners face some unique challenges: Back-to-back hurricanes, combined with rising property insurance costs, insurability challenges, slowing migration and new construction have combined to lower home prices in most major Florida markets.
- Condo challenges aren’t limited to Florida: A surge in multifamily completions has created price pressure across the country, especially in metro regions such as Little Rock, Ark. (-6%), Austin, Texas (-5.6%), and Denver (-3.9%).…“Analysis of ICE HPI data shows a broad-based cooling of home prices, with 90% percent of U.S. markets experiencing slower home price growth compared to three months ago,” said Andy Walden, Head of Mortgage and Housing Market Research for ICE. “This trend is being driven by improved inventory levels, which are up 27% over last year, and stabilized mortgage rates, which dipped below 6.6% in early March and have been holding in the 6.6%-6.7% range.”“Early March data shows condo prices dropping for the first time in more than a decade, with the largest impacts in the Sunbelt, most notably in Florida,” remarked Walden. “While falling condo prices can erode equity levels among existing condo owners, they also afford modest relief to those looking to prospective home buyers. In fact, 95% of U.S. markets have experienced at least slight improvements in affordability compared to a year ago.”emphasis added
Mortgage Delinquencies Increased in February
Here is a graph of the national delinquency rate from ICE. Overall delinquencies increased in February but are below the pre-pandemic levels. Source: ICE McDash
- Delinquencies edged up 6 basis points (bps) to 3.53% in February; that’s up 19 bps from a year ago, but still 32 bps below pre-pandemic levels
- FHA mortgages accounted for 90% of the 131K year-over-year rise in the number of delinquencies, despite making up less than 15% of all active mortgages
- The increase, which broke from the typical seasonal pattern, was driven by early-stage delinquencies, with 30-day past dues rising 6% while 60 and 90+ day delinquencies both declined slightly
- The FHA delinquency rate, which is now up 112 bps over the past 12 months and 225 bps higher than it was entering the pandemic, remains a concern, with more than a tenth of FHA loans (11%) currently past due on payments
Active Foreclosures Increase but Remain Low
Active foreclosures increased – mostly due to the pickup following the end of the VA foreclosure moratorium. This is still below pre-pandemic levels.
- Loans in active foreclosure rose by 2% in February, driven solely by a rise in VA foreclosures, as the market continues to normalize following the expiration of the VA foreclosure moratorium
- VA foreclosure starts increased again in the month (+23%), while FHA and conventional foreclosure starts dipped by -27% and -26% respectively from January
- February foreclosure starts were 35% above last year, but that’s almost entirely due to the resumption of VA foreclosure activity; FHA starts were down -9% and conventional up a modest 4%
- Rising FHA delinquencies have yet to move the needle on foreclosure activity ‒ with the number of active FHA foreclosures up a modest 6% from the same time last year
- It is unclear where VA foreclosure starts will settle as servicers work through the backlog of serious delinquencies stuck in pipeline during the recent moratorium
House Price Growth Continues to Slow
Here is the year-over-year in house prices according to the ICE Home Price Index (HPI). The ICE HPI is a repeat sales index. ICE reports the median price change of the repeat sales. The index was up 2.7% year-over-year in February, down from 3.4% YoY in January.
- Home price growth is beginning to cool as modestly improved demand is running up against higher levels of inventory across most major markets
- The annual home price growth rate dipped to +2.7% in February from +3.4% the month prior, marking the sharpest single month of deceleration in the annual home price growth rate since early 2023, 2023, with an early look at March data via ICE’s enhanced Home Price Index suggesting that price growth has cooled further to +2.2%
- On a seasonally adjusted basis, home prices rose by +0.11% in the month, equivalent to a seasonally adjusted annualized rate of +1.3%, the softest such growth in five months
- In simple terms, that means that if the current rate of monthly growth we’ve seen in recent months were to persist, it would result in annual home price growth continuing to slow as we make our way through Q1 and into Q2 2025
There is much more in the mortgage monitor.