As the unemployment claims have increased more than ever before over the past several weeks, several of us are still living in fear; however, there is some good news. More than 4 million initial unemployment filers have likely already found a new job, especially as industries such as health care, food and grocery stores, retail, delivery, and more increase their employment opportunities. Breaking down what unemployment means for homeownership and understanding the significant equity homeowners have today, are important parts of seeing the picture clearly when looking through a lens of uncertainty.
One of the biggest questions right now is whether this historic unemployment rate will initiate a new surge of foreclosures in the market. The fear is very real and understandable. However, despite the staggering number of claims, there are actually many reasons why we won’t see a significant number of foreclosures like we did during the housing crash twelve years ago. The amount of equity homeowners have today is a leading differentiator in the current market.
In early May, John Burns Consulting noticed that 58.7% of homes in the U.S. have at least 60% equity. That number is drastically different than it was in 2008 when the housing bubble burst. The last recession was painful, and when prices dipped, many found themselves owing more on their mortgage than what their homes were worth. Homeowners simply walked away at that point. Now, 42.1% of all homes in this country are mortgage-free, meaning they are owned free and clear. Those homes are not at risk for foreclosure (see graph below):
In addition, CoreLogic notes the average equity mortgaged homes have today is $177,000. That’s a significant amount that homeowners won’t be stepping away from, even in today’s economy (see chart below):
In essence, the amount of equity homeowners have today positions them to be in a much better place than they were in 2008.
Several of us are undergoing fear and uncertainty, and it will not be easy. Although, we can see strength in our current market through homeowner equity that was not therein the past . This may be the light at the end of the tunnel that will help us make it through these difficult times.