Moving Up to Your Dream Home? Don’t Wait!Mortgage interest rates have risen by more than half of a point since the beginning of the year, and many assume that if mortgage rates rise, home values
Is Family Mortgage Debt Out Of Control
Some homeowners have recently done a “cash out” refinance and have taken a portion of their increased equity from their house. Others have sold their homes and purchased more expensive homes with larger mortgages. At the same time, first-time buyers have become homeowners and now have mortgage payments for the first time.
These developments have caused concern that families might be reaching unsustainable levels of mortgage debt. Some are worried that we may be repeating a behavior that helped precipitate the housing crash ten years ago.
Today, we want to assure everyone that this is not the case. Here is a graph created from datareleased by the Federal Reserve Board which shows the Household Debt Service Ratio for mortgages as a percentage of disposable personal income. The ratio is the total quarterly required mortgage payments divided by total quarterly disposable personal income. In other words, the percentage of spendable income people are using to pay their mortgage.
Today’s ratio of 4.44% is nowhere near the ratio of 7.21% during the peak of the housing bubble and is instead at the lowest rate since 1980 (4.38%).
Bill McBride of Calculated Risk recently commented on the ratio:
“The Debt Service Ratio for mortgages is near the low for the last 38 years. This ratio increased rapidly during the housing bubble and continued to increase until 2007. With falling interest rates, and less mortgage debt, the mortgage ratio has declined significantly.”
Many families paid a heavy price because of questionable practices that led to last decade’s housing crash. It seems the American people have learned a lesson and are not repeating that same behavior regarding their mortgage debt.
Ed believes "Every Family Should Feel Confident Selling and Buying a Home" and he has made this his personal mission in service to others. Earning your trust is how Ed prioritizes everyday for you an....
Latest Blog Posts
Access: An Important Factor in Getting Your House SOLD!So, you’ve decided to sell your house. You’ve hired a real estate professional to help you through the entire process, and they
5 Ways Tax Reform Has Impacted the 2018 Housing MarketStarting late last year, some predicted that the 2018 tax changes would cripple the housing market. Headlines warned of the potential for double