250,000 homebuyers are underwater on their mortgage who bought in 2022.
Let’s break this down. I order to do that, we need to understand this is a headline – people get paid when you click and read…
First off, this was completely foreseeable. We all knew the market would shift as the past 3 years involved growth that wasn’t sustainable.
Compare this to the 2007/08 crash which took everyone by surprise and they’re vastly different.
Let’s remember that very few homebuyers are purchasing for the short term. They’ll stay in their homes for 3, 5, 10+ years. The short term economics don’t matter, unless you’re an investor looking to make a quick profit in 3, 6, 9 months…but that’s a different ball game.
Everyone knows long term prices will go up. For the people who bought earlier this year who are underwater, most of them will have used FHA and VA loans with very little down.
If they put 3.5% down and bought at the peak, then yes, they’re most likely underwater now. But they didn’t buy to sell it soon… And can’t gauge the overall health of the market on “250,000 homeowners under water this year alone”…although it makes a great headline!
As the market rebounds, these homeowners will find greater appreciation and have increased equity.
Investing in a home is a long term play and you’re guaranteed to win if you stay in it long enough.
The market has a 100% chance of rebounding.
BUYERS – now is a great time to find good deals as you have more negotiating power and prices have depressed.
SELLERS – we are still above pre-pandemic values.
INVESTORS – Rents are still very high and demand is elevated.