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It's really hard to overstate how strong a financial position American homeowners are in. Currently, American mortgage holders carry only 48% loan-to-value on their homes, down from 70% a decade ago. That’s one of the central conclusions revealed by the Federal Housing Finance Agency’s (FHFA) latest update on residential mortgages. Here’s what else the agency reports:
- Adjustable-rate mortgages (ARMs) account for 3.5% of outstanding mortgages, down from 9.6% one decade ago.
- The average credit score among borrowers with an active loan is 743.
- There were 50.8 million outstanding mortgages with unpaid balances totaling $11.7 trillion at the end of the first quarter of 2024.
- Breakdown of mortgage loans by rate percentage:
- 21.9% of mortgaged homes have a rate < 3%
- 35.4% have a rate 3.0–3.99%
- 18.7% have a rate 4.0–4.99%
- 9.6% have a rate 5.0–5.99%
- 14.3% have a rate >= 6.0%
Our take
The Great Recession that ensued after the ’08 financial crisis ended years ago. Yet, many act as if the issues we dealt with then apply even now. People still think that adjustable rate mortgages (ARMs) are a huge portion of the loan market and that there are a lot of people with subprime credit owning a lot of homes. None of those things are true. The average credit score among borrowers with an active loan is 743 and ARMs account for just 3.5% of outstanding mortgages. Homeowners, moreover, are in an unbelievably strong financial position. According to the FHFA, only 0.3% of borrowers have negative equity in their homes.
Don’t misunderstand us: There are problems with the current housing market, especially with housing affordability. But current concerns about affordability have nothing to do with the issues we faced in ’08. In fact, despite mortgage rates staying higher for longer than expected, the housing market remains supported by a solid base of exceptionally strong borrowers. The problem with the current housing market isn’t the current crop of homeowners who have homes, but the number of people who presently can’t afford one.