- From 2000 to 2022, upgrading to a 25% more expensive home would
have required the average homeowner to increase their principal and
interest payment by roughly 40%, or about $400 per month
- Today, that same trade-up buyer’s payment would increase by an
average of $1,384 per month, a 103% jump that highlights the
real-world pressures keeping current mortgage holders “locked in”
to their homes
- Simply giving up their current rate to move across the street
to an equivalently priced home in today’s market would result in a
nearly 40% increase in P&I – roughly as much as the historical
trade-up cost
- Homeowners who took out mortgages when rates were near record
lows in 2020 and 2021 face an even steeper “move across the street”
cost, with such a lateral move requiring a 60% higher monthly
payment
- Trading up for these borrowers – who account for two out of
every five active mortgages – would take a 132% increase in monthly
P&I
- The trade-up cost – and the associated lock-in effect – varies
significantly across geographies, from a 72% payment increase on
the low end in Buffalo to more than 140% in Los Angeles and San
Jose
- Inventory remains constricted, but improved, as 65% of major
U.S. markets have more homes available for sale today than at this
time last year
- Lower interest rates in late Q4 and early Q1 led to home sales
in February hitting their highest adjusted level since March
2023
- The February ICE Home Price Index showed strength in the
market, with adjusted home prices rising by +0.43%, up from +0.33%
in January, which is equivalent to a +5.3% seasonally adjusted
annualized rate
Intercontinental Exchange, Inc. (NYSE:ICE), a leading global
provider of technology and data, released its April 2024 ICE
Mortgage Monitor Report, based on the company’s industry-leading
mortgage, real estate and public records data sets.
There are many headwinds facing the would-be seller in today’s
market, making their existing mortgage payment particularly
attractive in comparison. While this has been the case for some
time, according to Andy Walden, Vice President of Enterprise
Research Strategy, the ICE Research and Analysis team sought to
quantify this "lock-in effect" beyond simply identifying the number
of borrowers within or below a given interest rate band.
"After American mortgage holders secured some of the lowest
first lien rates ever and benefited from record home price growth
on top of that, we wanted to quantify just how locked-in folks
truly are and what kind of rate declines would be needed to shake
some of that inventory loose," said Walden. "Leveraging the ICE
Home Price Index and our loan level mortgage data, we looked at how
much it would cost the average homeowner with a mortgage to trade
up to a 25% more expensive home in today's market – or to simply
move across the street, for that matter, into a home identical to
their own. The results were bracing, to say the least.
“That average homeowner’s mortgage payment would more than
double, to gain just 25% in property value – hardly an entertaining
proposition. That said, you’d be hard-pressed to find a more vivid
illustration of the lock-in effect that’s kept for sale inventory
in a hole for the last few years. Simply giving up their current
rate to move across the street to an equivalently priced home in
today’s market would result in a nearly 40% increase in P&I, an
average of $500 more per month. Lower rates would ease the
calculation for many and make moves more reasonable. But the net
result continues to be too few homes for too many buyers. Until
that fundamental mismatch is addressed, simple supply and demand
will continue to press on both inventory and affordability.”
Though inventory remains constricted, there have been some signs
of improvement. While still lagging 40% below pre-pandemic
averages, February’s inventory deficit was the shallowest of any
February since 2020. Inventory levels rose in 60 of the 100 largest
U.S. markets in the month, with 65% of major markets having more
homes available for sale today than they did at the same time last
year.
“After closing out 2023 at an 11-year low, home sales have begun
to improve over the last two months,” Walden added. “In fact, lower
interest rates in late Q4 and early Q1 led to February home sales
hitting their highest adjusted level since March 2023. With sales
rising, and inventory still tight, months of supply edged slightly
lower in February, continuing to provide a floor for home prices.
Our February ICE Home Price Index showed strength in that regard,
with adjusted home prices rising by +0.43%, up from +0.33% in
January, which is equivalent to a +5.3% seasonally adjusted
annualized rate. Keep in mind that SAAR had fallen below 1% as
recently as five months ago.”
The lock-in effect on inventory varies significantly across
geographies, with the cost to give up an existing mortgage and buy
a 25% more expensive home ranging from a low of a 72% payment
increase in Buffalo, N.Y., to more than 140% in Los Angeles and San
Jose, Calif. While home prices and mortgage amounts are certainly a
factor in that increased cost, the effect is compounded by the fact
that borrowers in more expensive cities tend to have both lower
mortgage rates and higher unpaid balances on their existing homes.
Because of this, the lock-in effect on inventories may be strongest
in more expensive California markets such as Los Angeles, San
Diego, San Francisco and San Jose – markets that also face
challenges in terms of new construction.
“Mortgage rates need to come down to dislodge the lock-in
effect,” Walden concluded. “Since most factors influencing 30-year
rates are out of lenders’ control, they need to be able to find
ways to compress spreads without simultaneously compressing their
own profit margins. That’s key to our mission at ICE – identifying
and eliminating inefficiencies in housing finance through
technology, while finding smarter, faster, cheaper and more
transparent ways to originate loans and increase liquidity."
Much more information on these and other topics can be found in
this month’s Mortgage Monitor.
About Mortgage Monitor
ICE manages the nation’s leading repository of loan-level
residential mortgage data and performance information covering the
majority of the overall market, including tens of millions of loans
across the spectrum of credit products and more than 160 million
historical records. The combined insight of the ICE Home Price
Index and Collateral Analytics’ home price and real estate data
provides one of the most complete, accurate and timely measures of
home prices available, covering 95% of U.S. residential properties
down to the ZIP-code level. In addition, the company maintains one
of the most robust public property records databases available,
covering 99.9% of the U.S. population and households from more than
3,100 counties.
ICE’s research experts carefully analyze this data to produce a
summary supplemented by dozens of charts and graphs that reflect
trend and point-in-time observations for the monthly Mortgage
Monitor Report. To review the full report, visit:
https://www.icemortgagetechnology.com/resources/data-reports
About Intercontinental Exchange
Intercontinental Exchange, Inc. (NYSE: ICE) is a Fortune 500
company that designs, builds, and operates digital networks that
connect people to opportunity. We provide financial technology and
data services across major asset classes helping our customers
access mission-critical workflow tools that increase transparency
and efficiency. ICE’s futures, equity, and options exchanges --
including the New York Stock Exchange -- and clearing houses help
people invest, raise capital and manage risk. We offer some of the
world’s largest markets to trade and clear energy and environmental
products. Our fixed income, data services and execution
capabilities provide information, analytics and platforms that help
our customers streamline processes and capitalize on opportunities.
At ICE Mortgage Technology, we are transforming U.S. housing
finance, from initial consumer engagement through loan production,
closing, registration and the long-term servicing relationship.
Together, ICE transforms, streamlines, and automates industries to
connect our customers to opportunity.
Trademarks of ICE and/or its affiliates include Intercontinental
Exchange, ICE, ICE block design, NYSE and New York Stock Exchange.
Information regarding additional trademarks and intellectual
property rights of Intercontinental Exchange, Inc. and/or its
affiliates is located here. Key Information Documents for certain
products covered by the EU Packaged Retail and Insurance-based
Investment Products Regulation can be accessed on the relevant
exchange website under the heading “Key Information Documents
(KIDS).”
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995 -- Statements in this press release regarding
ICE's business that are not historical facts are "forward-looking
statements" that involve risks and uncertainties. For a discussion
of additional risks and uncertainties, which could cause actual
results to differ from those contained in the forward-looking
statements, see ICE's Securities and Exchange Commission (SEC)
filings, including, but not limited to, the risk factors in ICE's
Annual Report on Form 10-K for the year ended December 31, 2023, as
filed with the SEC on February 8, 2024.
Source: Intercontinental Exchange
Category: Mortgage Technology
ICE-CORP
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version on businesswire.com: https://www.businesswire.com/news/home/20240401378094/en/
ICE Media Contact Mitch Cohen mitch.cohen@bkfs.com +1
704-890-8158 ICE Investor Contact: Katia Gonzalez
katia.gonzalez@ice.com +1 (678) 981-3882
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