Why Today’s Mortgage Debt Isn’t a Sign of a Housing Market Crash
Why Today’s Mortgage Debt Isn’t a Sign of a Housing Market Crash One major reason why we’re not heading toward a foreclosure crisis is the high level of equity homeowners have today. Unlike in the last housing bubble, where many homeowners owed more than their homes were worth, today’s homeowners have far more equity than debt. That’s a big part of the reason why even though mortgage debt is at an all-time high, this isn’t 2008 all over again. As Bill McBride, Housing Analyst for Calculated Risk, explains: “With the recent house price increases, some people are worried about a new housing bubble – but mortgage debt isn’t a concern . . .” Today’s homeowners are in a much stronger position than ever before. So, let’s break it down and see why today’s mortgage debt isn’t anything to fear. More Equity, Less Risk of Foreclosures According to the St. Louis Fed, total homeowner equity is nearly triple the total mortgage debt today (see graph below): High equity makes it less likely for homeowners to face foreclosure because they have more options. If someone struggles to make their mortgage payments, they could potentially sell their house and still come out ahead thanks to their built-up equity. Even if home values were to dip, most homeowners would still have a comfortable cushion of equity. That’s a big contrast to the 2008 crisis, where many homeowners were underwater on their mortgages and had few options to avoid foreclosure. Delinquency Rates Are Still Near Historic Lows Another reassuring sign is that, according to the NY Fed, the number of mortgage payments that are more than 90 days late is still near historic lows (see graph below): This is partly due to a variety of programs designed to help homeowners through temporary hardships. As Marina Walsh, VP of Industry Analysis at the Mortgage Bankers Association (MBA), says: “. . . servicers are helping at-risk homeowners avoid foreclosures through loan workout options that can mitigate temporary distress.” So, even if someone falls behind on their payments, there are support systems in place to help them avoid foreclosure. Low Unemployment Helps Keep the Market Stable One other important factor is today’s low unemployment rate. More people have stable jobs, which means they’re better able to afford their mortgage payments. As Archana Pradhan, Principal Economist at CoreLogic, explains: “Low unemployment numbers have helped reduce the overall delinquency rate . . .” During the last housing crisis, unemployment was much higher, which led to a wave of foreclosures. Today’s unemployment rate is very different (see graph below): That stability in how many people are employed is one of the reasons the market doesn’t have the same risks as it did the last time. There’s no need to worry about a wave of distressed sales like the one we saw in 2008. Most homeowners today are employed and have low-interest mortgages they can afford, so they’re able to make their payments. As McBride states: “The bottom line is there will not be a huge wave of distressed sales as happened following the housing bubble.” Bottom Line While mortgage debt is high, rest assured the market isn’t on the brink of another crash. Instead, most homeowners are in a strong position. If you have questions or concerns, let’s connect.
How To Get Your House Ready To Sell in 2025
Don’t Miss Out on the Growing Number of Down Payment Assistance Programs
Don’t Miss Out on the Growing Number of Down Payment Assistance Programs With rising home prices and volatile mortgage rates, it’s important you know about every resource that could help make buying a home possible. And one thing you’ll want to be aware of is just how much the number of down payment assistance (DPA) programs has grown lately. Take a look at the graph below to see how many new programs have been added in the last year, according to data from Down Payment Resource: More Programs, More Opportunities for You So, what does this increase mean for you? With more programs available, there’s a higher likelihood that one of them could help you reach your homeownership goals. And these programs aren’t small-scale help either – the benefits can go a long way toward covering a chunk of your costs. As Rob Chrane, Founder and CEO of Down Payment Resource, shares: “We are pleased to see a growing number of these programs, and think they are becoming a targeted way to help first-time and first-generation homebuyers struggling to save for a down payment get into a home they can afford. Our data shows the average DPA benefit is roughly $17,000. That can be a nice jump-start for saving for a down payment and other costs of homeownership.” Imagine being able to qualify for $17,000 toward your down payment—that’s a big boost, especially if you’re looking to buy your first home. With that level of help, buying a home may be more within reach than you think. But it’s worth calling out that the growth in DPA options isn’t just focused on first-time and first-generation buyers. Many of the new programs are also aimed at supporting affordable housing initiatives, which include manufactured and multi-family homes. This means that more people, and a wider variety of home types, can qualify for down payment assistance, making it easier for you to find an option that fits your needs. Talk to a Real Estate Expert About What’s Available for You With so many DPA programs out there, you need to make sure you’re finding the right one for you. That’s why it’s key to lean on your real estate and lending professionals for guidance. The Mortgage Reports says: “The best way to find down payment assistance programs for which you qualify is to speak with your loan officer or broker. They should know about local grants and loan programs that can help you out.” Your loan officer or real estate agent will know what’s available in your area and can point you toward programs that align with your goals. Bottom Line With more down payment assistance programs than ever before, now’s a great time to explore how these options can help on your homebuying journey. Let’s work together to make sure you’ve got a team of expert advisors in place to see which DPA programs could be a fit for you.
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