The current market and why foreclosures are unlikely to impact it.
Today’s topic of conversation ties into last week’s discussion on why rents may be increasing. There is still a lot of talk in the media about foreclosures and drawing comparisons to the 2008 crisis. However, when we look at the numbers, it’s clear that we are currently experiencing one of the strongest real estate markets in my lifetime. I’ve been in this industry for many years, and the current mortgage rates on existing homes are a key factor in preventing foreclosures.
Why is that the case? Well, first of all, we have incredibly low rates that many homeowners have locked in, making their homes highly affordable compared to renting. Approximately 80% of all mortgages in the U.S. have rates below 5%, with a significant portion even below 3%. In 2008, rates were not only higher, but many homeowners also faced a loss of equity.
Two factors contribute to the strength of the housing market: current rates and homeowners’ equity. Currently, 23.6% of homes with mortgages have rates under 3%, 38.5% have rates between three and 4%, and 20% have rates between 4% and 5%. A smaller percentage falls between 5% and just above 6%. These favorable rates play a crucial role in maintaining a strong housing market.
Another key factor is homeowners’ equity. The graph also shows that a significant percentage of homeowners have more than 50% equity in their homes, while 32.4% have less than 50% equity. Additionally, 38.7% of homeowners in the U.S. own their homes outright, with no mortgages. This equity can be utilized to move up to a better property or downsize for those looking to downsize. The available equity in the housing market is substantial.
To sum it up, we are currently witnessing one of the most solid and stable housing markets in recent memory. Homeowners who are considering selling should take advantage of their equity and make a move without letting the increasing mortgage rates discourage them. If you have 50% equity or more, it could be an ideal time for you to enter the market.
If you have any questions or need assistance, please don’t hesitate to reach out by phone, email, or a visit to the office.