Understanding the current state of the US mortgage and housing markets
The recent Los Angeles County wildfires have left a significant imprint on the local housing market, affecting more than 20,000 properties.
CoreLogic’s ModelX AVM reports that the fires impacted 180,000 homes in the area, totaling an estimated value of US$350 billion.
Around 55% of these homes are mortgaged, holding a combined debt of US$50bn against US$300bn in equity. The estimated insured property damages could reach up to US$45bn, with the average equity per borrower in the affected area around US$1.1 million.
Challenges in mortgage and housing markets
Despite a strong US economy and job market supporting most borrowers, the end of 2024 saw a slight increase in mortgage delinquencies.
The share of mortgages that were 30 days-past-due or more rose to 3.2% in November 2024, the highest rate since early 2022. The delinquency rate reflects a marginal increase from November 2023’s 2.9%, with early-stage delinquencies rising despite a decrease in long-term overdue payments.
Trends in home lending and sales
Mortgage rates have trended upward since September, influencing overall housing activity.
However, some buyers have turned to buydowns to manage costs, with the share of loans featuring buydown points climbing to 3.1% in 2024 from 2.2% in 2023.
The housing market still shows resilience, with pending home sales in December 11% higher than the previous year, and monthly sales closing 4% above December 2023 despite the rising rates.
Delinquency rates following natural disasters
Natural disasters tend to spike delinquency rates, but these typically return to pre-disaster levels over time. The recent wildfires may see an increase in delinquent mortgages, though many could be under forbearance plans, temporarily skewing delinquency data.
Entry of Gen Z into the housing market
Gen Z buyers are increasingly participating in the housing market, accounting for 13% of home-purchase applications in 2024, up from 10% in 2023.
Their presence is more pronounced in affordable Midwestern markets compared to pricier coastal areas, with many opting for co-living arrangements or having parents as co-signers, CoreLogic reported.
Real estate market movements
The end of the year saw a seasonal downturn in the active inventory of existing homes for sale, closing 2% below the previous year.
However, the national median list price for homes was up by 10% in December year-over-year, with closed prices increasing by 11%, indicating a continued upward trend in home values despite market challenges.
Find the CoreLogic report here.
