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Black Knight: Annual home price appreciation climbs to a 6-month high

But the company warns rate volatility could hinder future growth

In August, annual home price growth held flat at 3.8% after rising for the first time in 17 months during July. This lackluster growth signaled the market was either experiencing a lull or bracing itself for a rebound in the months to come.  

Black Knight, a provider of data and analytics to the mortgage and real estate industries, suggested August’s dull activity could bode well for September housing numbers as affordability significantly improved between the two months.

Turns out the company was right on the money.

According to Black Knight’s Home Price Index, a report that measures home prices nationwide, U.S. home prices experienced the largest single-month increase in nearly two years in September.

The company indicates that during the month, annual home price growth ticked up by 0.2% to 3.95%, representing the highest rate of growth since March of this year.

This means the average home now costs 54% more than it did at the bottom of the market in early 2012 and now sits 15% above the pre-crisis peak set in June of 2006.

While this increase can largely be attributed to the nation’s relatively low-interest rates, which have spurred a substantial increase in purchase and refinance demand, Black Knight warns recent rate volatility could hinder future growth.

“Of course, rates have risen in recent weeks, hitting 3.78% as of the last week of October according to the Freddie Mac PMMS,” Black Knight writes. “That’s the highest 30-year rates have been since June which may put a damper on any potential for a significant reheating in the market.”

This weakening could especially impact America’s refi-eligible population, which may see the growth in their home equity slow as mortgage rates tick back up.

According to Black Knight’s Mortgage Monitor report, a study that analyzes residential mortgage data, the pool of 30-year fixed-rate mortgages held by people paying financing costs that are 0.75% or higher than current rates dropped to 6.8 million in the last week of October, down from a record high of 11.7 million in early September.

The average U.S. rate for a 30-year fixed mortgage reached a three-year low of 3.49% during the week ending on Sept. 6, according to Freddie Mac. Since then, the mortgage rate has risen to 3.78% for the week ending on Nov. 1, representing the highest percentage since mid-July.

If rates continue to climb, potential homebuyers may be discouraged from entering the market, which could put a lid on further home price appreciation growth.

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