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Yes, but they did qualify it, by specifying they're referring to recent mortgages, and especially low down payment mortgages. Furthermore, the specified cities with a large military presence where many people buy homes with government-backed mortgages are especially impacted, which has historically been a very politically sensitive group. > Although it's not unusual for new homeowners to be underwater for a brief period, especially if they buy during the summer when prices are elevated, "It is much more pronounced this year than it normally is because prices are starting to cool," said Andy Walden, Black Knight's president of enterprise research. The portion of underwater borrowers tripled in October, he noted I agree that the over-all situation is probably not very dire yet, but I do see a path where the rapid rise in home prices in the last few years combined with a now rapid rise in rates creates a situation where people can't or won't sell. Buyers can afford less today since the rates are higher. Anyone who saw the last few years saw the "price" of their property skyrocket (whether realized or unrealized gains). Until people forget about these high valuations, very few people are going to be willing to sell their house at a lower price (people psychologically don't like to "discount" below what they think is fair, and 35% lower is not fair, economy be damned). Anyone who recently entered a mortgage will be underwater, and likely unable to sell. For example, I live in SF, where the average home price is (rounded) about $1M. In 2021, that was just about $5k a month in mortgage payments, which is probably what a DINK household in SF can afford. Today, a $5k/month gets you roughly $650k of house - 65% of a year ago! Anyone who bought recently, or saw a house similar to theirs sell (eg. their neighbor) is going to have trouble agreeing to sell their house for 65% of what they could have a year ago. BUT the same buyers aren't going to be able to afford the almost $8k needed to buy a $1M home today. The only way out of this "rut" without the fed lowering rates is going to be slowly waiting for the market to forget or wait for salary inflation to eat away at the extra monthly costs. |