Don’t let the headlines scare you: what to know about Negative Home Equity
Home equity has been a hot topic in real estate news lately. And if you’ve been following along, you may have heard there’s a growing number of homeowners with negative equity. But don’t let those headlines scare you.
In truth, the headlines don’t give you all the information you really need to understand what’s happening and at what scale. Let’s break down what’s really happening. That way, you’ll have the context you need to understand the big picture.
Headlines Focus on Short-Term Equity Numbers and Fail to Convey the Long-Term View
One piece of news circulating focuses on the percentage of homes purchased in 2022 that are currently underwater. The term underwater refers to a scenario where the homeowner owes more on the loan than the house is worth. This was a huge issue when the housing market crashed in 2008, but it’s much less significant today.
Media coverage right now is based loosely on a report from Black Knight, Inc. The actual report from that source says this:
“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, . . .”
This report is talking about homes purchased in 2022, but headlines don’t mention that timeframe or provide the context about how unusual of a year 2022 was for the housing market. In 2022, home price appreciation soared.
Homeowners who bought their last year at the peak or those who paid more than market value are more likely to fall into the category of being marginally underwater. The media isn’t necessarily including this in their coverage.
So, what does that mean? It’s important to remember, owning a home is a long-term investment, not a short-term play. When headlines focus on the short-term view, they’re not providing the full context.
Typically, the longer you stay in your home, the more equity you gain as you pay down your loan and as home prices appreciate. With recent market conditions, you may not have gained significant equity right away if you owned the home for just a few months.
As with everything, knowing the context is important. If you have questions about real estate headlines or about how much equity you have in your home, let’s connect.
Let’s connect so I can help you strategize to achieve your dream of homeownership this season.
Questions about buying or selling a home in Beaverton? Contact Donna Meeuwsen at 503.583.3200 or email firstname.lastname@example.org