Stagnant levels of for-sale inventory have offset what might otherwise be steep home price declines in October. The month’s 0.43% decline was the smallest since prices peaked in June. 

Black Knight released its latest Mortgage Monitor Report, which found that three months of stalled inventory growth is tempering home prices drops. Affordability remains near 35-year lows.

But purchase mortgages originated during the last year have more equity risk.

According to the report:

  • Consumers who bought homes prior to the last 12 tumultuous months have “minimal” equity risk
  • 450K mortgaged homes were underwater at the end of Q3
    • 60% have mortgages that were originated in 2022 — and 95% of those 2022 originations were purchase loans

This means more than 250K buyers (8%) who purchased in 2022 owe more than their home is now worth. What’s more, roughly one million have less than 10% equity.

“Negative equity rates continue to run far below historical averages, but a clear bifurcation of risk has emerged between mortgaged homes purchased relatively recently versus those bought early in or before the pandemic,” said Ben Graboske, Black Knight Data & Analytics president. “Risk among earlier purchases is essentially nonexistent given the large equity cushions these mortgage holders are sitting on. More recent homebuyers don’t fare as well.”

Still, many were expecting a bigger price correction than we’ve seen, and Graboske attributes that to the “never-ending inventory shortage,” which has balanced out the other factors like high mortgage rates. 

The pace of annualized appreciation in October was down to 9.3% from 10.7% in September—the seventh consecutive month of cooling, but the smallest decline since May.

New for-sale listings in October were 19% (-94K) below 2017-2019 levels. It was the largest deficit in six years, with the exception of March and April 2020.

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