Cheaper homes are taking much longer to recover their value than moderate- or high-priced homes, with those in the states hardest hit by the housing crash lagging the most, according to a new report from real estate analytics firm Black Knight Financial services. According to Trey Barnes, Black Knight’s senior vice president of loan data products, home price recovery for the lowest 20 percent of property values has lagged behind those at the top in America’s hardest-hit states.
Using data from Black Knight’s home price index (HPI), "we looked at HPI appreciation from pre-crisis peaks to today in the 10 states currently trailing the furthest behind their pre-crisis housing maximums," Barnes said in a statement. "The data showed a clear difference in the levels of recovery among home price tiers. The Black Knight HPI separates home values for every geographical division into five equal tiers; those in the lowest 20 percent of home values have been lagging behind their higher-valued counterparts in recovery to pre-crisis peaks, sometimes considerably.
"For example, in Nevada – overall, still more than 39 percent off its pre-crisis peak – properties in the lowest tier are nearly 47 percent off their peaks, as compared to 36 percent for those in the highest tier. In California, an even starker contrast emerges: properties in the highest tier have now come within just over 3 percent of their pre-crisis peak, while those in the lowest 20 percent are still almost 32 percent down. In many cases, these disparities between price tiers can be attributed to the fact that during the bubble, lower-tier properties appreciated at much higher rates than higher-valued properties and likewise fell harder and further when the bubble broke."
Black Knight also looked at loan modification distribution and found that activity was down overall in 2014. Modifications performed under the government’s Home Affordable Modification Program (HAMP) accounted for over 50 percent of all modifications throughout the year, with the majority of activity focused on FHA/VA-backed mortgages. Close to 70 percent of 2014 HAMP modifications were on FHA/VA loans, as compared to about 15 percent in 2013. While HAMP modifications generally include greater payment reductions than proprietary modifications, HAMP payment reductions have been lower in 2014; due in no small part to the lower unpaid balances – and therefore starting monthly payments – on most FHA/VA loans. Also, although HAMP modifications exhibit lower re-default rates than proprietary modifications across all vintages, early figures are showing that re-defaults among 2014 HAMP modifications are higher than those of both 2012 and 2013.
Black Knight also dug into the reasons behind November’s sharp jump in the national delinquency rate, which rose 11.8 percent. Delinquency rates often rise around the holidays, but the jump was the largest in six years; in fact, it was the largest month-over-month increase for any month since November 2008. Black Knight found, however, that quirks of the calendar may have more to do with the apparent spike than any change in underlying economic conditions; with the way the holidays fell and the month ending on a Sunday, there were two fewer business days in which loan payments are processed than normal, meaning more payments may have been recorded as late. The five largest month-over-month increases in delinquencies of the past seven years have all occurred in months ending on Sundays, the firm noted.
The total U.S. loan delinquency rate was 6.08 percent in November, and the total U.S. foreclosure pre-sale inventory rate 1.63 percent, down 3.5 percent from October.
