6 Reasons this housing re-balancing in NOT the same as 2007-2010

Chris Muellenbach | June 21, 2022

From CNBC article: Is this current housing re-balancing going to be the same as the 2007-10 housing crash?

VERY unlikely!

Why?

New lending regulations that resulted from that meltdown put today’s borrowers on far firmer footing. Of the 53.5 million first lien home mortgages in the USA today, the average borrower FICO credit score is a record high 751. It was 699 in 2010, 2 years after the financial sector’s meltdown. Lenders have been much more strict about lending, much of that reflected in credit quality.
Today’s homeowners have record amounts of home equity. Tappable equity hit a record high of $11 trillion collectively this year, a 34% increase from 2021.
Mortgage debt in the US is now less than 43% of current home values, the lowest on record. Negative equity is virtually nonexistent. 25% of borrowers who were under water in 2011. Now just 2.5% of borrowers have less than 10% equity in their homes.
There are currently 2.5 million adjustable-rate mortgages outstanding today...about 8% of active mortgages, the lowest volume on record. In 2007, just before the housing market crash, there were 13.1 million ARMs, representing 36% of all mortgages. More than 80% of today’s ARM originations also operate under a fixed rate for the first 7-10 years.
While 1.4 million ARMs are currently facing higher rate resets, those borrowers will have to make higher monthly payments. In 2007, about 10 million ARMs were facing higher resets.
Mortgage delinquencies are now at a record low, with just under 3% of mortgages past due. (CNBC)