The share of homeowners who maintain a traditional forward mortgage is at 62.9 percent, accounting for the lowest level of such homeowners since at least 2005. This is in spite of the fact that the household-owned value of the housing market in the United States is at a record high of $26.12 trillion, and that housing equity and non-home equity line of credit (HELOC) levels of mortgage debt are also at record highs.
This is according to blog post released by the Urban Institute on Tuesday written by Michael Neal, senior research associate in the organization’s Housing Finance Policy Center.
“The share of homeowners with a mortgage declined steadily between 2008 and 2017, from 68.4 to 62.9 percent—the lowest level since at least 2005,” Neal writes. “Conversely, the share of owner-occupied households with no mortgage has climbed to 37.1 percent over the same nine-year period.”
This is one factor that explains why there is lower mortgage debt relative to real estate values. Another factor is that home equity lines of credit have become less prominent now than they have been in years past.
“The volume of home equity lines of credit fell from $714 billion in 2009 to $399 billion in the second quarter of 2019,” Neal says, citing data from the Federal Reserve Bank of New York.
One of the primary reasons that mortgage rates overall have dropped is because of an aging population, Neal says.
“Older households are much more likely than younger households to have paid off their mortgage,” he writes. “Though the share of elderly people with a mortgage has increased gradually over time to 38 percent in 2017 for those ages 65 and older, this share is well below 80 percent for those ages 35 to 54.”
As the baby boomer generation continues to age, the addition of younger borrowers into the housing market will become increasingly important to lenders, Neal says.
“In addition, the reduced share of homeowners with a mortgage further proves that a shrinking portion of this group is cost burdened,” he adds. “By increasingly paying off their mortgages and converting their entire home value into equity, existing homeowners create a cushion for emergencies and retirement. However, the growth in the share of homeowners ages 65 and older with a mortgage bears watching as it may represent an emerging risk to the mortgage market.”
Read the full blog post at the Urban Institute.
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