Is Mortgage Debt Out of Control?

    The housing crisis of the last decade was partially caused by unhealthy levels of mortgage debt. Homeowners were using their homes as ATMs by refinancing and swapping their equity for cash.

    When prices started to fall, many homeowners found themselves in a negative equity situation (where their mortgage was higher than the value of their home). As a result, they walked away. This caused prices to fall even further.

    Headlines are again talking about record levels of mortgage debt, making the comparison to the challenges that preceded the housing crash. However, cumulative debt is not an important data point. If we look at the debt as a percentage of disposable personal income, we are at an all-time low.

    Furthermore, according to a new report from ATTOM Data Solutions, more than 1-in-4 homes with a mortgage have at least 50% equity. The report explains:

    “[O]ver 14.5 million U.S. properties were equity rich — where the combined estimated amount of loans secured by the property was 50 percent or less of the property’s estimated market value — up by more than 834,000 from a year ago to a new high as far back as data is available, Q4 2013.”

    Bottom Line

    Unlike 2008, homeowners have a comfortable level of mortgage debt and are sitting on massive amounts of home equity. They will not be walking away from their homes if the housing market begins to soften.

    Source: Keeping Current Matters

     

     

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    Ann Rudd

    Ann is a 3rd generation real estate professional in her family and has inactive licenses in Maryland and Pennsylvania and is actively licensed in North and South Carolina. Seeing other members of her family help others achieve their home ownership dreams inspired her to become a real estate agent. Helping families is what her job is all about. Whether they are buying a larger home, downsizing, transitioning to a new town or neighborhood, Ann's mission is to make those transitions as smooth as possible.

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