Equity
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.
Some Highlights
- Thanks to recent home price appreciation, homeowners have near record amounts of equity – and you may too. On average, homeowners have $311K worth of equity.
- Once you sell, you can use it to fund your down payment on your next home or maybe even to buy a smaller house in cash.
- If you want to find out how much equity you have, connect with an agent. Because it may make a move a lot more feasible than you’d think.
At some point, you’ve probably heard the saying: “Yesterday was the best time to buy a home, but the next best time is today.”
That’s because homeownership is about the long game – and home prices typically rise over time. So, while you may be holding out for prices to fall or rates to improve, you should know that trying to time the market rarely works.
Here’s what most buyers don’t always think about: the longer you wait, the more buying could cost you. And you deserve to understand why.
Forecasts Say Prices Will Keep Climbing
Each quarter, over 100 housing market experts weigh in for the Home Price Expectations Survey from Fannie Mae, and they consistently agree on one thing: nationally, home prices are expected to rise through at least 2029.
Yes, the sharp price increases are behind us, but experts project a steady, healthy, and sustainable increase of 3-4% per year going forward. And while this will vary by local market from year to year, the good news is, this is a much more normal pace – a welcome sign for the housing market and hopeful buyers (see graph below):
And even in markets experiencing more modest price growth or slight short-term declines, the long game of homeownership wins over time.
So, here’s what to keep in mind:
- Next year’s home prices will be higher than this year’s. The longer you wait, the more the purchase price will go up.
- Waiting for the perfect mortgage rate or a price drop may backfire. Even if rates dip slightly, projected home price growth could still make waiting more expensive overall.
- Buying now means building equity sooner. When you play the long game of homeownership, your equity rewards you over time.
What You’ll Miss Out On
Let’s put real numbers into this equation, because it adds up quickly. Based on those expert projections, if you bought a typical $400,000 home in 2025, it could gain nearly $80,000 in value by 2030 (see graph below):
That’s a serious boost to your future wealth – and why your friends and family who already bought a home are so glad they did. Time in the market matters.
So, the question isn’t: should I wait? It’s really: can I afford to buy now? Because if you can stretch a little or you’re willing to buy something a bit smaller just to get your foot in the door, this is why it’ll be worth it.
Yes, today’s housing market has challenges, but there are ways to make it work, like exploring different neighborhoods, asking your lender about alternative financing, or tapping into down payment assistance programs.
The key is making a move when it makes sense for you, rather than waiting for a perfect scenario that may never arrive.
Bottom Line
Time in the Market Beats Timing the Market.
If you’re debating whether to buy now or wait, remember this: real estate rewards those who get in the market, not those who try to time it perfectly.
Want to take a look at what’s happening with prices in your local area? Whether you’re ready to buy now or just exploring your options, having a plan in place can set you up for long-term success.
Some Highlights
- Over the past 5 years, home prices have risen dramatically. If you own a home, that means your house may be worth a lot more than you think.
- Nationally, prices are up nearly 60% since 2019. And, if selling has been on your mind, you can use that bigger-than-expected return to power your next move.
- If you want to know how much your home is worth in today’s market, reach out to a local agent. The number may surprise you.
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