Many people are thinking about the real estate market. That’s because the market that was not stable for the past two years is over. The difference is being felt now. The question is, how financially strong are homeowners in America? Mortgage debt increased by more than 10 trillion dollars over the past year, and some think that’s a bad sign.
Recently Odeta Kushi, Deputy Chief Economist at First American, answered that question when she said:
“U.S. households own $41 trillion in owner-occupied real estate, just over $12 trillion in debt, and the remaining -$29 trillion in equity. The national ‘LTV’ in Q2 2022 was 29.5%, the lowest since 1983.”
She continued on to say:
“Homeowners had an average of $320,000 in inflation-adjusted equity in their homes in Q2 2022, an all-time high.”
LTV Ratio
The term LTV refers to the loan-to-value ratio. For more context, here’s how the Mortgage Reports defines it:
“Your ‘loan to value ratio’ (LTV) compares the size of your mortgage loan to the value of the home. For example: If your home is worth $200,000, and you have a mortgage for $180,000, your LTV ratio is 90% — because the loan makes up 90% of the total price.
You can also think about LTV in terms of your down payment. If you put 20% down, that means you’re borrowing 80% of the home’s value. So your LTV ratio is 80%.”
Why Is This Important?
The housing market crash in 2008 caused many people to owe more on their homes than they were worth. This is not the case today, as many people have built up equity in their homes. If someone needed to sell their home, they would likely have enough equity to sell it and still have money left over. This helps people stay in control of their homes, which is another reason why we will not see the housing market crash again.
Sandi & Debbie Say…
Homeowners today are stronger financially than they have been in a long time. This is because they have handled their equity well since the crash, and prices for homes have gone up in the last two years. This makes homeownership a good idea at any time.
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