It’s once again rare for homeowners to owe more on their mortgages than what they’re worth.

Low housing supply is hurting potential buyers — but it’s boosting current owners’ home values. Only 9.1 percent of homeowners are underwater on their mortgages, says a study from Zillow. More than 30 percent were at the peak of the housing crisis. “For much of the country the Great Recession is an increasingly distant memory,” says Zillow economist Aaron Terrazas. “The American economy is booming once again and markets are now shifting their gaze to future downturn risks.”

Homeowners’ fortune is trouble for buyers

Owners lost more than a quarter of the value in their homes when the market crashed. Those who held on to their homes over the past 10 years earned more wealth, and have come out from under on their mortgages. This helps out those owners, but makes the house hunt much harder — and more expensive — for potential buyers. Despite the improvements for the millions of homeowners who have surfaced from underwater on their mortgages, 4.5 million Americans are still drowning. And 713,000 owe at least twice as much as their homes’ value. “Scattered in neighborhoods across the country, the legacy of the mid-2000s housing bubble and bust lingers among the millions of Americans still underwater on their mortgages, trapped in their homes with no easy options to regain equity other than waiting,” Terrazas says. “Their struggles mean there are fewer homes on the market for homebuyers today.” Fifteen percent have earned equity in their homes, but not enough to sell for enough profit for a newer home. The longer they stay put, the more challenging and expensive making a purchase will be for first-time homebuyers.

Low housing supply is driving up costs reported this May that home costs won’t slowed down this year. A study from Arch Mortgage Insurance Company concluded that housing affordability is harder on homebuyers now than it’s been in 25 years. The study reported housing affordability to be down 5 percent from the year before. And it’s predicted to sink another 10 to 15 percent by the end of the year. Even worse for buyers, real estate experts predict home values to increase over the next two years. “If mortgage rates and home prices continue to rise as expected, affordability will get hammered by year-end as demand continues to outstrip supply,” says Arch Mortgage economist Ralph G. DeFranco. “A strong U.S. economy combined with a housing shortage in many markets means that there is little hope of any price drop for buyers.” But people still need a roof over their heads. Rising costs haven’t stopped Americans from buying at all, home sales are up. Home sales have increased by 2 percent since last year, according to real estate company RE/MAX. And considering the current market, 62 percent of think those buyers are going to regret buying now, a poll from down payment insurance provider ValueInsured reported. “Housing confidence — as do home prices — goes up and down, but what’s noteworthy now is the decline among homeowners,” says ValueInsured CEO Joe Melendez. “Many are stuck in homes they have outgrown and cannot upgrade, which explains the inventory shortage we see at the starter-home level.”    

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Joe Pye

Joe Pye

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Article last modified on July 17, 2018 Published by, LLC . Mobile users may also access the AMP Version: Homeowners Have More Value in Their Homes Now - AMP.