A red-hot housing market is finally cooling down following consecutive rate hikes initiated by the Federal Reserve, but experts say that this downturn is nothing like the last one. Unlike the bubble and bust of 2007, today’s housing market is bolstered by much stronger lending regulations, record low mortgage debt, and a significant flow of tappable equity, which will provide a cushion for many homeowners as prices begin to fall.
Adjustable-rate mortgages were another major driving force of the housing market crash over a decade ago, representing 36% of all mortgages in 2007, but today, they account for just 8% of active mortgages, CNBC reports.
There are currently 2.5 million adjustable-rate mortgages, or ARMs, outstanding today, or about 8% of active mortgages. That is the lowest volume on record. ARMs can be fixed, usually for terms of five, seven or 10 years.
ARMs today are not only underwritten to their fully indexed interest rate, but more than 80% of today’s ARM originations also operate under a fixed rate for the first seven to 10 years.
Advertisement
Related Stories
Demographics
Gen Z Ranks Housing Affordability as Biggest Concern Ahead of 2024 Presidential Election
While the issue is most important to young voters, 80% of Americans rank housing affordability as a top priority when considering who will have their vote
Housing Markets
14 US Housing Markets Where Inventory Is Returning to Pre-Pandemic Levels
Many of these markets experienced strong population growth during the onset of the COVID-19 pandemic
Financing
10 States Where Shopping Around for a Mortgage Really Pays Off
In California, homebuyers could see savings of more than $130,000 over the lifetime of their loans