This is the Strongest Housing Market in our Lifetime

Looking at the figures today, one thing that strikes out is the strength of the housing market. We can tell that this is one of the most foundationally sound housing markets in our experience, if not the strongest. Here are two fundamentals to back up my point. 

1. The Current Mortgage Rate on Existing Mortgages

First, let’s look at the current rate on existing mortgages. According to the Federal Housing Finance Agency (FHFA), as of the fourth quarter of last year, over 80% of existing mortgages have a rate below 5%. That’s significant. And, to take that one step further, over 50% of mortgages have a rate below 4% (see graph below):

Now, there's a lot of chatter in the media about a potential foreclosure catastrophe or an increase in homeowners defaulting on their loans, but examine this. Homeowners with such low mortgage rates will strive as hard as they can to keep their mortgages and remain in their homes. That's because they can't afford to buy another house or even rent an apartment at the same price they are now. Their current mortgage payment is more manageable. Even if they downsize, with today's increased mortgage rates, it may cost them more.

Here's why the housing market has such a strong base now. Because there are so many homeowners with such cheap mortgage rates, we can avoid a crisis with a rush of foreclosures like there was in 2008.

2. The Amount of Homeowner Equity

Second, Americans are sitting on tremendous equity right now. According to the Census and ATTOM, roughly two-thirds (around 68%) of homeowners have either paid off their mortgage or have at least 50% equity (see chart below):