In the whirlwind of numbers and percentages that illustrate our current housing scene, one crucial detail emerges – the extraordinary resilience and potency of today's housing market. Examining this scenario, it appears that we are experiencing one of the most robust housing markets in recent history, if not the most robust. Here, we delve into the underpinning factors that substantiate this claim.
An enlightening starting point in our analysis is the review of the prevailing rate on existing mortgages. Data from the Federal Housing Finance Agency (FHFA) reveals that over 80% of existing mortgages, as of the last quarter of the previous year, sport a rate below 5%. This is indeed noteworthy. Further examining this data, we find that over half of these mortgages bear a rate below 4%.
The media buzz about a looming foreclosure crisis or a surge in homeowners defaulting on loans seems rather far-fetched when considered against this backdrop. Homeowners blessed with such advantageous mortgage rates will undoubtedly strive to retain their mortgages and homes. The reasoning is simple - they can't venture out to purchase another house or rent a property while maintaining the same affordability level. Even if they chose to downsize, the current higher mortgage rates could lead to increased costs.
This crucial factor serves as a key cornerstone, providing our housing market with a sturdy foundation. The high percentage of homeowners enjoying low mortgage rates prevents a repeat of the 2008 crisis scenario, marked by a flood of foreclosures hitting the market.
Another fundamental that speaks to the market's strength is the vast equity pool homeowners currently hold. Data from the Census and ATTOM reveal that about 68% of homeowners have either fully repaid their mortgages or boast at least 50% equity.
This phenomenon, termed 'equity rich' in industry parlance, carries significant implications. Looking back at 2008, several individuals faced the tough choice of abandoning their homes since their outstanding loan amount exceeded the property's worth.
However, the present scenario paints a different picture, with homeowners amassing considerable equity over the past few years. High levels of homeowner equity shield us from a surge of distressed properties entering the market, as witnessed during the crash. This dynamic further solidifies today's housing market foundation.
The evidence suggests that we are currently navigating one of the most resilient housing markets in our lifetime. With homeowners determined to maintain their current mortgage rate and their substantial equity, the housing market's strength becomes more apparent. Therefore, it becomes increasingly clear that today's circumstances differ significantly from those of 2008. The powerful combination of favorable mortgage rates and robust homeowner equity provides an unshakeable underpinning to our current housing market.
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