Uncovering the Reality Behind Negative Home Equity Reports

Home equity has been a major talking point in the realm of real estate as of late. With numerous homeowners experiencing negative equity, it's understandable if you are feeling apprehensive. Still, don't let these headlines get to you; there is help available for those struggling with their home loan payments and plenty of resources out there that can give insight into what types of options exist!

Understanding the enormity of newsworthy events can be difficult, considering headlines don't give us all the information we need. To get a broader perspective and more in-depth understanding, let's delve into one of the equity stories that have been making waves lately. By doing this, you'll obtain an informed view on what is actually transpiring and how significant it really is!

Headlines that prioritize short-term equity figures often neglect to provide the larger, long-term perspective.

As news continues to spread, one particular topic that has arisen is the percentage of homes bought in 2022 currently underwater. To put it simply, when a homeowner owes more on their loan than what the property's worth dictates and is referred to as being "underwater," which was an especially problematic issue during the 2008 housing market crash but now isn't nearly as widespread.

Currently, media reports draw their information from a Black Knight, Inc. report outlining the following:

“Of all homes purchased with a mortgage in 2022, 8% are now at least marginally underwaterand nearly 40% have less than 10% equity stakes in their home, . . .”

Let's break this down further to understand the full picture. The Black Knight report is discussing homes bought in 2022, yet headlines don't always include that time frame or give details about what an extraordinary year it was in terms of housing prices. By March-April 2022, we had reached a peak appreciation rate for home values before beginning to slow again. It's essential to comprehend these nuances when interpreting data and reports.

Homeowners who purchased their residence near the peak of the market or paid a premium price in its succeeding months are much more likely to be classified as slightly underwater on their mortgage. Additionally, media outlets often forget to include an essential component: "marginally". This qualifier is absolutely crucial when evaluating this scenario.

For those who acquired a home in 2022, this is an investment for the long-term. Thus, it's essential to remember that when newspaper articles focus solely on what appears profitable in the short-run without giving readers a comprehensive understanding of all circumstances involved, they are not providing you with entire context.

Generally, the longer a homeowner resides in their property, the more equity they will build by paying off their loan and taking advantage of rising home prices. However, considering current market conditions, it’s unlikely that those who recently purchased houses have earned much equity yet if they've only been residing in it for several months. Despite this factoid though-most homeowners don't intend on selling anytime soon anyways!

Let Us Assist You

It's always best to have a proper understanding of the context before making any decisions. If you're curious about real estate headlines or how much equity is in your home, we are available to help answer all your questions.

1-11-2023