Unemployment claims have risen, folks are uneasy. Here's some good news: more than 4 million initial unemployment filers have likely already found a new job, especially as industries such as health care, food and grocery stores, retail, delivery, and more increase their employment opportunities.
Breaking down what unemployment means for homeownership, and understanding the significant equity Americans hold today, are important parts of seeing the picture clearly when sorting through this uncertainty.
One of the biggest questions right now is whether this historic unemployment rate will initiate a new surge of foreclosures in the market. It’s a very real concern.
Despite the large number of claims, there are actually many reasons why we won’t see a significant number of foreclosures like we did during the housing crash twelve years ago. Why is that? Two words -- home equity. This is the difference between the home's fair market value and the outstanding balance of all loans on the property. The cash you would be handed if you sold once you paid off the mortgage.
The amount of equity homeowners have today is a leading differentiator in the current market. Today, according to John Burns Consulting, 58.7% of homes in the U.S. have at least 60% equity. That number is drastically different than it was in 2008 when the housing bubble burst.
The last recession was painful, and when prices dipped, many found themselves owing more on their mortgage than what their homes were worth. Homeowners simply walked away at that point. Now, 42.1% of all homes in this country are mortgage-free, meaning they’re owned free and clear. Those homes are not at risk for foreclosure (see graph below):
In addition, CoreLogic notes the average equity mortgaged homes have today is $177,000. That’s a significant amount that homeowners won’t be stepping away from, even in today’s economy (see chart below):
Recap: the amount of equity homeowners have today positions them to be in a much better place than they were in 2008.
PS: I do not recommend that you tap into your home equity at this time or you'll be where we were in 2008.
There is still strength in our current market through homeowner equity that has not been there in the past. Home values are staying consistent here in the Triangle, NC. I'm here to talk, so give me a call!