The average American household with a credit card debt of more than $200,000 has been spending $1.1 trillion in mortgage-backed securities in the last five years, according to a new report from Credit Suisse.
And that trend is expected to continue, as Americans have the option to refinance their loans and invest their savings in financial products that are less risky.
“There is a real possibility that the housing bubble will pop,” said Jason Sperling, a credit analyst with Credit Suise.
“Home equity loan growth has been very low for a long time.
And so that makes the fact that it is now more attractive for some consumers that they can refinance.”
Sperling says the report is based on data from the U.S. Department of Housing and Urban Development.
He said there is a “high degree of confidence” that home equity investments will continue to grow.
But the U-shaped housing market has become even more volatile since the financial crisis.
As of early October, there were 1,000 new foreclosure filings each day, according the U.-S.
Many of those are due to a change in federal rules that make foreclosures more likely to be dismissed.
“That has changed the landscape,” said Spering.
“There is less equity available for people to invest in, and that has led to more volatility.”
The report shows that people who have not yet purchased a home or refinance have more difficulty than those who have done so.
In the first quarter of 2019, the percentage of households with home equity mortgages grew by a stunning 6.7 percent.
But the rate of change was slower than the average for the same quarter of last year.
“If the housing market continues to deteriorate, that will likely have a long-term effect on the housing economy,” said Andrew Zimbalist, chief economist at RBC Capital Markets.
“In terms of the mortgage market, it is likely that some borrowers will have to take some on, and some will have no recourse,” he said.
Spering says the majority of homeowners who take on the loan are making low to moderate payments.
He says that is not necessarily a bad thing because they are saving for a down payment and the ability to reflate the home if it is sold.
The report does not include the costs of getting a mortgage or the monthly payments to keep up with a mortgage.
Sperler says that will be a different story for the elderly.
“The elderly are the first to have their mortgage payment deferred, and they are the ones who have the biggest debt burden,” he noted.
“So it is a very good bet that this will be an area of concern.”
Spencer Bixby, senior economist at Credit Suiser, said the report does show that home ownership is on the rise among younger Americans.
He expects that it will continue.
“It is not clear that homeownership is a prerequisite for the housing recovery to be as strong as it is,” Bixer said.
“But we expect that the home ownership rate among younger households will remain high.
The majority of the increase in homeownership among younger homeowners has been in the past year.”
The housing bubble peaked in late 2007, and as it recovered, the market grew by more than 3 million homes a month.
By mid-2009, the number of homes for sale had reached record levels, with more than 9.5 million sold in September.
But as prices dropped, people started to default on their mortgages, leading to a correction in the housing markets and a collapse in the number and size of foreclosable homes.