In recent news articles, there seems to be a lot of fear mongering surrounding increasing foreclosures and consumer debt. But how bad is it really and what is the media comparing these numbers to?
.
Surging Credit Card Use 🙄
Our first article headline comes from CNBC, which claims “Household Debt Soars at Fastest Pace in 15 Years as Credit Use Surges.” This makes it sound like people are overspending and stretched beyond their limits. During the pandemic, fewer people were using their credit cards. They weren’t buying concert tickets or plane tickets, or booking vacations, so credit card usage was low. However, now that we are emerging from this, people are spending and only now starting to approach what we would consider “normal” levels of credit card use. When consulting the graph provided by the article, we are not even close to pre-pandemic credit use yet. So yes. Compared to two years ago in lockdown, credit card spending is up. However, in the grand scheme of things, it’s below “normal” for non-pandemic times.
.
Mortgage DTI ratio Up đź¤
Similarly, the mortgage “debt to income” (DTI) ratio has increased, but not nearly to the degree that these articles want you to believe. In fact, when you look at the graph which goes all the way back to 1980, we have been at record low mortgage debt to income levels in the past two years. The reason the number has gone up a bit recently is because interest rates increase, but it isn’t anything to be too concerned about considering that – again – this number is way lower than what we would consider “normal.” Take a look at the easy to use Mortgage Calculator on our website to estimate your monthly payment and see how much house you can afford.
.
Skyrocketing Foreclosures 🥴
The second topic we read about claims that there are “extreme” levels of foreclosures and short sales around the corner. While we don’t want to dismiss that there are foreclosures and short sales numbers increasing, it’s also important to put this in perspective. Firstly, we are coming from a near 20-year low of foreclosures, so the increase is yet again a sort of normalization of numbers. We will be keeping an eye on how this number increases but, because of the equity people have built in their homes, it is unlikely that this number will grow to signal a housing market crash.
.
In many ways, our word for the year is “normal” or “normalizing.” We are coming out of an extreme market period that is adjusting. While it may not go back to what we considered “normal” pre-pandemic, it also will not stay what we considered “normal” during the pandemic years. So, we are using our previous definitions of normal (pre-pandemic trends vs. pandemic trends) to understand what is most likely the “new normal.”
.
As the media continues to use scary language, Hatch Homes Group is always here to help contextualize what you’re reading in the headlines. We pride ourselves on being your trusted advisors and would love to speak with you regarding your particular situation. Don’t hesitate to reach out if you want more information on what you’re reading or hearing and how it applies to you.
.
Check out our Market Update Video for the full story!