This Real Estate Market is the Strongest of Our Lifetime!
When you look at the numbers today, the one thing that stands out is the strength of this housing market. We can see this is one of the most foundationally strong housing markets of our lifetime. Maybe the strongest. Here are two fundamentals that prove this point.
1. The Current Mortgage Rate on Existing Mortgages
First, let’s look at the current rate on existing mortgages. According to the Federal Housing Finance Agency, as of the fourth quarter of last year, over 80% of existing mortgages have a rate below 5%. That’s significant. And, over 50% of mortgages have a rate below 4%.
Now, there’s a lot of talk in the media about a potential forclosure crisis or a rise of homeowners defaulting on their loans, but consider this. Homeowners with such good mortgage rates are going to work hard as they can to keep that mortgage and stay in their homes. That’s because they can’t go out and buy another house, or even rent an apartment, and pay what they do today. Their current mortgage payment is more affordable. Even if they downsize, with today’s higher mortgage rates, it could cost more.
Here’s why this gives the housing market such a solid foundation today. Having so many homeowners with such low mortgage rates helps us avoid a crisis with a flood of foreclosures coming to market like there was back in 2008.
2. The Amount of Homeowner Equity
Second, Americans are sitting on tremendous equity right now. According to the Census and ATTOM, roughly two-thirds (around 68%) of homeowner’s have either paid off their mortgage or have at least 50% equity.
In the industry, the term for this is equity rich. This is significant because if you think back to 2008, some people had to make the difficult decision to walk away from their homes because they owed more on the home than it was worth.
But this time, things are different because homeowners have built up so much equity over the past few years alone. And, when homeowners have that much equity, it helps us avoid another wave of distressed properties coming onto the market like we saw during the crash. It also creates an extremely strong foundation for today’s housing market.
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