Total Number of Homes in the USA:
127,266,986 houses (all homes in the analysis):
Breakdown of Homes Based on Loan to value ratio ( Loan Amount / Estimated Value of home)
- The estimated value of the home is subjective. The valuations used are very generous, often exceeding Zestimates by 5% to provide conservative estimates.
| Category | Houses in Category | Risk | Potential Outcome |
|---|---|---|---|
| LTV > 0.8 | 8,781,610 | A 20% drop in property values could push these homes into negative equity due to high leverage. | Homeowners may owe more than the property is worth, leading to potential foreclosure or difficulty refinancing. |
| 0.66 < LTV < 0.8 | 7,787,136 | A 20% decrease in property value would raise the LTV closer to or above 80%, eroding equity. | Financial strain due to reduced equity, with potential refinancing challenges, though negative equity is less likely. |
Total Homes in High-Risk Categories (LTV > 0.8 and 0.66 < LTV < 0.8):
16,568,746 houses (combined LTV > 0.8 and 0.66 < LTV < 0.8 categories)
Breakdown:
- LTV > 0.8: 8,781,610 houses (Higher Risk) – With a 20% decline in property values, these homes could experience negative equity. Homeowners may owe more than the property is worth, potentially leading to foreclosure, refinancing difficulty, or an inability to sell.
- 0.66 < LTV < 0.8: 7,787,136 houses (Moderate Risk) – A 20% property value drop would reduce the equity in these homes and increase the LTV ratio closer to or above 80%. While negative equity is less likely, homeowners may face financial challenges, including difficulties refinancing or accessing home equity.
Conclusion:
Out of the 127,266,986 total homes, 16,568,746 have LTV ratios greater than 0.66, with the 8,781,610 homes in the LTV > 0.8 category being at higher risk if property values fall by 20%. Homes in the 0.66 < LTV < 0.8 category (7,787,136 homes) would see equity erosion, but they are less likely to enter negative equity. Both categories may face challenges in refinancing, selling, or tapping into home equity.
The implications are serious, especially given that home prices have already declined by 10-20% in many areas. Furthermore, homeowners in these categories have already made substantial monthly payments, often 10-12% of the original purchase price, in addition to the down payment over the course of ownership. This does not even account for additional costs like property taxes, insurance, and maintenance, which further strain their financial position.
Down from their 2022 peaks: Home prices in 19 of the 30 MSAs here were down from their respective peaks in mid-2022, so roughly from 27 to 28 months ago, led by these 14:
- Austin: -20.4%
- San Francisco: -10.0%
- Phoenix: -8.3%
- San Antonio: -7.5%
- Denver: -6.9%
- Sacramento: -6.0%
- Salt Lake City: -5.7%
- Portland: -5.4%
- Dallas: -5.0%
- Seattle: -4.9%
- Honolulu: -4.5%
- Tampa: -2.8%
- Nashville: -2.6%
- Houston: -2.4%, These are reported numbers. I know prices have fallen. Just look at price cuts in active listings.
16 million properties are under distress, with a 4% unemployment rate. The current inventory is 1.5 million, and the annual turnover is 4 million. Just imagine what would happen to the inventory if those unemployed individuals decided to sell.