Why Today’s Mortgage Debt Isn’t a Sign of a Housing Market Crash

One key reason North County, San Diego, is not facing a foreclosure crisis is the significant equity homeowners have built today. Unlike the last housing bubble, where many owed more than their homes were worth, homeowners in our area now have far more equity than debt, creating a stable and resilient market.

That’s a big part of the reason why even though mortgage debt is at an all-time high, this isn’t 2008 all over again. As Bill McBride, Housing Analyst for Calculated Risk, explains:

“With the recent house price increases, some people are worried about a new housing bubble – but mortgage debt isn’t a concern . . .”

Today’s homeowners are in a much stronger position than ever before. So, let’s break it down and see why today’s mortgage debt isn’t anything to fear.

More Equity, Less Risk of Foreclosures

According to the St. Louis Fed, total homeowner equity is nearly triple the total mortgage debt today (see graph below):

High equity is giving North County, San Diego homeowners more flexibility and security, making foreclosures far less likely. If someone is struggling with mortgage payments, they can often sell their home and still walk away with a profit thanks to their built-up equity. Even if home values dip, most homeowners here have a solid equity cushion. This is a stark contrast to the 2008 crisis, where many were underwater on their mortgages and had limited options to avoid foreclosure.

Delinquency Rates Are Still Near Historic Lows

Another reassuring sign is that, according to the NY Fed, the number of mortgage payments that are more than 90 days late is still near historic lows (see graph below):

This is partly due to a variety of programs designed to help homeowners through temporary hardships. As Marina Walsh, VP of Industry Analysis at the Mortgage Bankers Association (MBA), says:

“. . . servicers are helping at-risk homeowners avoid foreclosures through loan workout options that can mitigate temporary distress.”

In North County, San Diego, homeowners who fall behind on payments have several options to avoid foreclosure. Thanks to high equity levels and local support systems, they can explore solutions like selling, refinancing, or loan modifications. These resources provide a safety net, helping homeowners protect their investments and financial stability.

Low Unemployment Helps Keep the Market Stable

One other important factor is today’s low unemployment rate. More people have stable jobs, which means they’re better able to afford their mortgage payments. As Archana Pradhan, Principal Economist at CoreLogic, explains:

“Low unemployment numbers have helped reduce the overall delinquency rate . . .”

During the last housing crisis, unemployment was much higher, which led to a wave of foreclosures. Today’s unemployment rate is very different (see graph below):

That stability in how many people are employed is one of the reasons the market doesn’t have the same risks as it did the last time.

There’s no need to worry about a wave of distressed sales like the one we saw in 2008. Most homeowners today are employed and have low-interest mortgages they can afford, so they’re able to make their payments. As McBride states:

“The bottom line is there will not be a huge wave of distressed sales as happened following the housing bubble.” 

Bottom Line

While mortgage debt remains elevated, North County, San Diego’s housing market is stable, with most homeowners benefiting from strong equity positions. If you have questions about your options or want to explore strategies to maximize your home’s value, the Shafran Realty Group is here to provide expert guidance. Contact us today for a tailored consultation and take the next step with confidence.