Tag: #ATTOM

Let’s Talk about Foreclosures

It’s about perspective, not panic.

Your Uncle Bob, who “knows a little something about real estate,” is telling you that foreclosures are ticking up. He says that you should wait to buy until you can get a good deal.

Is he right?

Not really.

It is true that foreclosures are rising. But they are nowhere near the crisis level that Bob is suggesting. Here’s why.

Take a look at serious delinquencies – loans where the homeowner is more than 90 days late on their mortgage payments.

While those have increased slightly, data from the New York Fed shows they still remain low. And they aren’t anywhere close to levels seen when the market crashed (see graph below):

Right now, about 1% of mortgages are seriously delinquent. That’s only 1 in 100.

In the years around the crash, they were up around 9%. That’s 1 in 11.

That’s a big difference.

And it’s important to remember not all delinquencies even become foreclosure filings. Some homeowners who are falling behind will work out repayment plans with their banks and lenders because banks don’t want to see a wave of foreclosures either.

That’s why foreclosure numbers are even lower than delinquencies. ATTOM shows only 0.3% of all homes are currently going through a foreclosure filing. And some of those won’t even all go to a full foreclosure. That’s not a wave. That’s a ripple at most.

If People Are Falling Behind on Payments, Why Aren’t There Even More Foreclosures?

Maybe you’re wondering, if people are struggling financially, why aren’t there more foreclosures? Here’s the easiest way to answer that.

When households feel financial pressure, they tend to prioritize their mortgage payment above almost everything else. Because the last thing they want to lose is their home.

More data from the New York Fed shows serious delinquencies have risen more for credit cards and auto loans (the blue and green lines). But mortgage delinquencies and home equity lines of credit (borrowing against the value of your home) aren’t seeing the same big uptick (the yellow and orange lines). They’re a lot more stable overall.

In other words, people may fall behind on other debts, but they fight hard to keep their homes. And, in today’s housing market, they’re also in a strong equity position to do so.

Home Equity Changes Everything

Many people have built significant equity over the past several years. And that creates options. As Daren Blomquist, VP of Market Economics at Auction.com, explains:

“Distressed homeowners… many times they still have equity in their homes. There’s an opportunity for them to sell that home, avoid foreclosure, and walk away with equity.”

That’s a major difference from 2008. Back then, many homeowners owed more than their homes were worth. And selling wasn’t an easy solution. Today, for many people, it is. And even in situations where equity isn’t enough, homeowners are encouraged to contact their loan servicer early to explore alternatives to foreclosure.

Bottom Line

Are foreclosure filings rising slightly? Yes. Are they anywhere near crash territory? No. And homeowners today have far more equity and flexibility than they did during the crash.

If you’re concerned about what you’re seeing in the headlines, the best move isn’t panic, it’s perspective. And the data right now says this isn’t 2008 all over again.

If you’re not sure that this is the right time for you to make a change, you can always find us at 508-388-1994 (Mari and Hank) or 781-423-8662 (Colleen). We can walk you through your options.

Mari, Hank, and Colleen

Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision.

Four Ways Your Equity Can Work for You

Two-thirds of homeowners have a substantial amount of equity today.

Are you sitting at home today wondering if your house still works for you?

With everyone at home and unable to go outside because of the weather are you realizing that it’s just too small? Or are you closing doors and shutting off heat in rooms you haven’t used in years in order to keep utility bills down as you wait out the storm?

You may have heard that as a homeowner you have a lot of equity built up in your property. But what does that really mean?

Because your equity isn’t just a number, it’s a powerful asset that can help you take your next big step in life which could mean upsizing, downsizing or maybe saying goodbye to the cold weather.

How Much Equity Does the Typical Homeowner Have?

Here’s how it works. As you pay down your loan and home prices rise through the years, the share of your home that you own free and clear grows. That’s your equity.

And according to data from the Census and ATTOM two-thirds of homeowners have a substantial amount of it today.

  • 39% own their home outright without owing anything on it.
  • Another 27% have at least 50% equity in their homes (see chart below):

That’s a big deal. And just in case you’re wondering how that translates into real dollars, Cotality says the typical homeowner has almost $300k in equity today. That’s six figures.

And whether you have that much, even more, or a bit less, here are a few examples of how you can use it. 

1. Move Into a Home That Better Fits Your Life

Your needs change over time. Maybe your home is starting to feel cramped, or maybe you have more space than you need that your adult children have moved out. Either way, you can use your equity as a down payment on a home that’s a better fit for what you need now and going forward. You may even have enough equity to buy your next house in cash

2. Upgrade Your Current Home

If you’re not ready to move just yet, you could reinvest some of your equity in your current home instead. Renovations like a kitchen refresh or updated bathrooms could add value when it’s time to sell down the line. Finishing your basement might provide your family more elbow room. Replacing windows could help with those high utility bills. Just be sure to talk to us before you tackle your project list, so you can prioritize updates that’ll give you the biggest return later on.

3. Fund a Major Life Goal

Equity can also help fund your life goals – whether it’s starting a business, saving for retirement, covering education costs, or helping out someone you love. Some homeowners are even passing down some of that wealth to help fund a loved one’s down payment on a home.

4. Avoid Foreclosure in Tough Times

While the number of home foreclosures continues to be small, if you’re struggling with payments, your equity can also be a lifeline. Many homeowners who hit financial hardships can sell their homes and walk away with money in their pockets instead of facing foreclosure. If that’s something on your mind, please talk to us about your options and how your equity can help. 

Your Next Steps

If you’re interested in using your equity for one of the reasons above, here’s what to do:

  • Step 1: Ask us for a personalized equity assessment on your home.
  • Step 2: Meet with a financial advisor if you’re interested in using that equity.

When it comes to tapping into this resource, there are a few things you’ll want to keep in mind – like making sure you still have a good loan-to-value ratio (LTV) even if you use some of your equity.

That means, as a general rule of thumb, you want to maintain at least 20% equity in your home as a financial cushion – something many homeowners didn’t know back in the crash of 2008.

The good news is, according to the Intercontinental Exchange, most of today’s equity meets that guideline:

“As of Q4, mortgage holders have $17.3T in home equity, including $11.2T in tappable equity ‒ accessible via cash-out refinances or home equity lines while maintaining 20% equity in the property . . . ”

Bottom Line

Your home equity is one of the biggest financial assets you have. Whether you’re thinking about moving, remodeling, or working toward a big goal, it’s worth exploring your options. Reach out to us to learn more.

You can always find us at (508) 388-1994 [Mari and Hank] or (781) 423-8662 [Colleen].

What’s one goal you have that you’d go after right now, if you had the funds to do so?

Mari, Hank, and Colleen

Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision.