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, connect with a local real estate agent. Article Source: Keeping Current Matters

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What’s Behind Today’s Mortgage Rate Volatility?

If you’ve been keeping an eye on mortgage rates lately, you might feel like you’re on a roller coaster ride. One day rates are up; the next they dip down a bit. So, what’s driving this constant change? Let’s dive into just a few of the major reasons why we’re seeing so much volatility, and what it means for you. The Market’s Reaction to the Election A significant factor causing fluctuations in mortgage rates is the general reaction to the political landscape. Election seasons often bring uncertainty to financial markets, and this one is no different. Markets tend to respond not only to who won, but also to the economic policies they are expected to implement. And when it comes to what’s been happening with mortgage rates over the past couple of weeks, as the National Association of Home Builders (NAHB) says: “. . . the primary reason interest rates have been on the rise pertains to the uncertainty surrounding the presidential election. Although the election is now complete, there continue to be growing concerns over budget deficits.” In the short term, this anticipation has caused a slight uptick in mortgage rates as the markets adjust and react. Additionally, factors like international tensions, supply chain disruptions, and trade policies can drive investor sentiment, causing them to seek safer assets like bonds, which can indirectly impact mortgage rates. Essentially, the more global or domestic uncertainty, the greater the chance that mortgage rates may shift. The Economy and the Federal Reserve Inflation and unemployment are two other big drivers of mortgage rates. The Federal Reserve (the Fed) has been working to bring inflation under control, and has been closely monitoring the economy as they do. And as long as inflation continues to moderate and the job market shows signs of maximum employment, the Fed will continue its plans to cut the Federal Funds Rate. Although the Fed doesn’t set mortgage rates, their decisions do have an impact, and typically a cut leads to a mortgage rates response. And in their November 6-7th meeting, the Fed had the data they needed to make another cut to the Federal Funds Rate. And while that decision was expected and much of the mortgage rate movement happened prior to that meeting, there was a slight dip in rates. What To Expect in the Coming Months As we look ahead, mortgage rates will respond to changes in the Fed’s policies and other economic indicators. The markets will likely remain in a wait-and-see mode, reacting to each new development. And, with the transition of a new administration comes an element of unpredictability. A recent article from The Mortgage Reports explains: “Today’s economic indicators come with mixed pressures on mortgage rates and we’re likely to be in for a good amount of volatility as markets adjust and respond to the election . . .” The best way to navigate this landscape is to have a team of real estate experts by your side. Professionals will help you understand what’s happening and can provide you with the guidance you need to make informed housing market decisions along the way. Bottom Line The takeaway? Today’s mortgage rate volatility is going to continue to be driven by economic factors and political changes. Now is the time to lean on experienced professionals. A trusted real estate agent and mortgage lender can help you navigate through it. And with the right guidance, you can make informed decisions. Article Source: Keeping Current Matters

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Is Wall Street Really Buying All the Homes?

Let’s be real – buying a home right now is tough. You’re scrolling through listings, rushing to open houses, and maybe even losing out to more competitive offers. Somewhere along the way, you might’ve heard the reason it’s so hard to find a home is because big Wall Street investors are swooping in and snatching up everything in sight. But here’s the thing: that’s mostly a myth. While investors are part of the market, according to Redfin, they’re a relatively small part: Here’s what that means. Five out of every six homes are being purchased by everyday homebuyers like you – not big investors. So, before you get discouraged, let’s take a look at what’s really going on. You might be surprised to learn that Wall Street isn’t the competition you may think it is. Most Investors Are Small Mom-and-Pops Most investors aren’t the mega corporations you’ve probably heard about. In fact, many are your neighbors. A recent report from CoreLogic shows most investors are small, mom-and-pop types who own fewer than 10 properties. They aren’t massive companies with endless resources. Picture your neighbor who has another home they’re renting out or a vacation getaway. Only about 1% of the market is owned by large, mega investors with thousands of properties. The majority are still owned by individuals and smaller investors – not the Wall Street giants. Investor Purchases Are Declining Not only are most investors small, but overall investor purchases have been on the decline. As the same report from CoreLogic says: “Investors made 80,000 purchases in June 2024, compared with 112,000 in June 2023, and a nearly 50% percent drop from the high of 149,000 purchases in June 2021 . . .” And what does this mean going forward? CoreLogic goes on to point out this downward trend is expected to continue into 2025. So, if it seems like competition with investors is pushing you out of the market, it might help to know that investor activity is actually slowing down. Bottom Line The idea that Wall Street is buying up all the homes is largely a myth. Most investors are small ones, and the share of homes purchased by investors is declining – so you can take this one off your worry list. If you have questions about the housing market, talk to a local real estate agent. They can explain what’s really happening. Article Source: Keeping Current Matters

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