At a percentage share of 64.5% of total household debt in Q3 2018, mortgage debt now sits at the lowest share of total household debt since Q1 1988. Additionally, mortgage debt now sits at 65.9% of disposable household income, the lowest share of disposable household income since Q2 2001. The source of these statistics is data from the Federal Reserve Financial Accounts.
Why? Our lengthy housing recovery and long economic expansion from the financial crisis in 2008 have helped to reduce household mortgage debt. According to CoreLogic’s latest Home Equity Report, there are fewer mortgaged homeowners in negative equity (4.1%) today than there were last year (5%). And, there are substantially fewer homeowners in negative equity than there were (20.5%) in Q1 2010.
Stepping into first place among metros in states that saw significant housing market collapse in home equity during the Great Recession is Las Vegas. Las Vegas saw a drop to 5.1% of mortgaged homeowners in negative equity in Q3 2018 compared to 10.3% in Q3 2017.
Household mortgage debt in 2018 increased just 0.1% y/y based on inflation. This increase amounted to total mortgage debt of $10.3T or $131,463/owner occupied household. This total is the second lowest total of household mortgage debt since Q1 2004.
Simultaneously, the value of homeowners’ real estate increased by an inflation-adjusted 3.6% compared to last year. This increase of 3.6% helped homeowners keep their real estate assets at a steady 20.5% of their total assets.
What do all these statistics mean?
- Households are in better shape should a recession blossom. Increases in equity enable households to better weather economic uncertainties and downturns.
- Lenders who hold mortgage notes can be more confident that their loan portfolios are in better shape than their portfolios were during the last recession.
- Markets that were hardest hit during the previous recession are seeing significant increases in homeowner equity. That increased equity helps those “hard hit” areas minimize foreclosure risks.