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Weighing in on Mortgage Debt Then and Now

Real Estate Agent with Intero Real Estate Services, San Jose, Silicon Valley 01505493

Some homeowners have recently done a “cash out” refinance and have taken a portion of their increased equity from their house. Others have sold their homes and purchased more expensive homes with larger mortgages. At the same time, first-time buyers have become homeowners and now have mortgage payments for the first time.

These developments have caused concern that families might be reaching unsustainable levels of mortgage debt. Some are worried that we may be repeating a behavior that helped precipitate the housing crash ten years ago.

Today, we want to assure everyone that this is not the case. Here is a graph created from data released by the Federal Reserve Board which shows the Household Debt Service Ratio for mortgages as a percentage of disposable personal income. The ratio is the total quarterly required mortgage payments divided by total quarterly disposable personal income. In other words, the percentage of spendable income people are using to pay their mortgage.



Today’s ratio of 4.44% is nowhere near the ratio of 7.21% during the peak of the housing bubble and is instead at the lowest rate since 1980 (4.38%).

Bill McBride of Calculated Risk recently commented on the ratio:

“The Debt Service Ratio for mortgages is near the low for the last 38 years. This ratio increased rapidly during the housing bubble and continued to increase until 2007. With falling interest rates, and less mortgage debt, the mortgage ratio has declined significantly.”

Bottom Line

Many families paid a heavy price because of questionable practices that led to last decade’s housing crash. It seems the American people have learned a lesson and are not repeating that same behavior regarding their mortgage debt.


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Posted by

Lisa Wiseman


Lisa Wiseman
Intero Real Estate Services, San Jose, Silicon Valley - San Jose, CA

Not only that, but with no end to the housing shortage in sight (particularly in Silicon Valley), due to a number of factors, including lower mortgage interest deductions, capital gains, property taxes and more, the likelihood of another big bubble is unlikely, short of a big impact on the global market. As always, supply and demand dictate the market.

Apr 19, 2018 10:47 AM