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The Truth About Negative Housz Equity Headlines



Housz equity has been a hot topic in real estate news lately. And if you’ve been following along, you may have heard there’s a growing number of houszowners with negative equity. But don’t let those headlines scare you.

In truth, the headlines don’t give you all the information you really need to understand what’s happening and at what scale. Let’s break down one of the big equity stories you may be seeing in the news, and what’s actually taking place. That way, you’ll have the context you need to understand the big picture.

Headlines Focus on Short-Term Equity Numbers and Fail To Convey the Long-Term View One piece of news circulating focuses on the percentage of houszes purchased in 2022 that are currently underwater. The term underwater refers to a scenario where the houszowner owes more on the loan than the housz is worth. This was a huge issue when the houszing market crashed in 2008, but it much less significant today. Media coverage right now is based loosely on a report from Black Knight, Inc. The actual report from that source says this:

Of all houszes purchased with a mortgage in 2022, 8% are now at least marginally underwater and nearly 40% have less than 10% equity stakes in their housz, . . .” Let’s unpack that for a moment and provide the bigger picture. The data-bound report from Black Knight is talking specifically about houszes purchased in 2022, but media headlines don’t always mention that timeframe or provide the surrounding context about how unusual of a year 2022 was for the houszing market. In 2022, housz price appreciation soared, and it reached its max around March-April. Since then, the rate of appreciation has been slowing down.

Houszowners who bought their housz last year right at the peak or those who paid more than market value in the months that followed are more likely to fall into the category of being marginally underwater. The qualifier marginally is another key piece of the puzzle the media isn’t necessarily including in their coverage.

So, what does that mean for those who purchased a housz in 2022? It’s important to remember, owning a home is a long-term investment, not a short-term play. When headlines focus on the short-term view, they’re not necessarily providing the full context. Typically speaking, the longer you stay in your housz, the more equity you gain as you pay down your loan and as housz prices appreciate. With recent market conditions, you may not have gained significant equity right away if you owned the housz for just a few months. But it’s also true that many houszowners who recently bought their housz are unlikely to be looking to sell quite yet.

Bottom Line As with everything, knowing the context is important. If you have questions about real estate headlines or about how much equity you have in your housz, let’s connect.

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