Negative Home Equity Headlines
Black Knight, Inc. recently reported that, “Of all homes purchased with a mortgage in 2022, 8% are now at least marginally underwater and nearly 40% have less than 10% equity stakes in their home, . . .”
Negative equity, or being "underwater" on a mortgage, occurs when the value of a home falls below the outstanding balance on the mortgage. This can happen as a result of declining housing prices, or if a homeowner takes on a mortgage that is larger than the value of the home. In 2008, the last financial crisis, a number of homeowners found themselves in this situation, as the housing market collapsed and many people were left owing more on their mortgages than their homes were worth.
It's important to remember that many factors can affect the housing market, such as interest rates, economic conditions, and government policies, among others. These factors can cause housing prices to fluctuate, both in the short-term and long term. While it's true that owning a home is generally considered a long-term investment, and that homeowners can gain equity over time as they pay down their mortgage and the value of the home appreciates, it's also crucial to consider the broader economic context in which the housing market operates.
Keep in mind that while media coverage can be informative, it's essential to look at the full picture and get a sense of the broader context in which the housing market is operating, such as the fact that the market is cyclical and therefore is subject to booms and busts. Typically speaking, the longer you stay in your home, the more equity you gain as you pay down your loan and as home prices appreciate. It’s also important to consult a professional for personalized expert advice.
Source: Keeping Current Matters