Tags: housing | market | mortgages | equity | investment | inflation | recession

270K Homebuyers This Year Underwater With Mortgages

a house model sits on a pile of cash
(Dreamstime)

By    |   Wednesday, 07 December 2022 10:04 PM EST

Americans who took out mortgages during the sizzling housing market earlier this year are not seeing a good return on their investments.

A report by real estate data analytics firm Black Knight showed of the 450,000 mortgaged homes in the U.S. underwater in the third quarter, nearly 60%, or roughly 270,000, originated in the first nine months of 2022.

Also, nearly 40% have less than 10% equity stakes in their home, mostly among government-backed Federal Housing Authority and Veterans Administration loans, which are popular among first-time and low-income buyers.

Early payment defaults — loans delinquent within six months of origination — have been rising among FHA borrowers over the past year and now sit above pre-pandemic levels, the report showed.

"Make no mistake: Negative equity rates continue to run far below historical averages, but a clear [divergence] of risk has emerged between mortgaged homes purchased relatively recently versus those bought early in or before the pandemic," Black Knight Data & Analytics President Ben Graboske said. "Risk among earlier purchases is essentially nonexistent given the large equity cushions these mortgage holders are sitting on. More recent homebuyers don't fare as well."

Annualized appreciation slowed to 9.3% from September's 10.7%, marking the seventh straight month of cooling, but the smallest decline since May, the report showed.

Even though home prices dipped .43% in October (a seasonally adjusted 0.13% decrease) — the smallest drop since prices peaked in June, the report said – equity risks for those who got mortgages in 2022 persist.

"Though the home price correction has slowed, it has still exposed a meaningful pocket of equity risk," Graboske said.

The report said he housing market is in an unusual place. Dropping prices and high interest rates usually point to more Americans being able to afford homes. But it is the opposite because affordability is near a 35-year low.

"Add in the effects of typical seasonality and one might expect a far steeper correction in prices than we have endured so far, but the never-ending inventory shortage has served to counterbalance these other factors," Graboske said.

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US
Americans who took out mortgages during the sizzling housing market earlier this year are not seeing a good return on their investments.
housing, market, mortgages, equity, investment, inflation, recession, real estate
342
2022-04-07
Wednesday, 07 December 2022 10:04 PM
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