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It's homebuying season, and trends indicate the mortgage market continues to evolve. Outstanding mortgage balances increased for the seventh straight quarter reaching a new high of $9.5 trillion, according to Experian data from the first quarter (Q1) of 2019. That figure is well above the outstanding balances reported during the peak of the mortgage crisis in 2008.
While mortgage debt numbers could be a cause for concern as buyers increasingly leverage their finances to purchases homes, other signs show they are more responsible with their mortgage debt than in years past. And for consumers just starting their homebuying search, low interest rates and available inventory could make their search more rewarding, depending on local market conditions.
The number of U.S. homes available for sale remained flat year over year in Q1 2019—the first time home inventory hasn't decreased in three years, according to Trulia. In addition, the National Association of Realtors (NAR) reported that existing-home sales are down 1.1% from May 2018 to May of this year. Of the homes sold in May 2019, 53% were on the market for less than a month, according to NAR.
Meanwhile, interest rates are expected to stay below 5% in 2019, according to the Mortgage Bankers Association (MBA). It forecasts 30-year mortgage rates will average 4.3% during Q2 2019 and remain around 4.4% through the second half of 2019.
Delinquency Rates Are Down
While mortgage balances climb, delinquency rates have steadily decreased over the years. Since 2009, payments made between 30 and 59 days late have decreased 61%. There were declines across the board, with the exception of a small increase this past year for payments 30 days late.
|Delinquency Rates as a Percentage of Mortgage Balances|
|Days Late||2009||2016||2018||2019||1-Year Change||3-Year Change||10-Year Change|
|30 - 59||2.73%||1.18%||1.03%||1.07%||5%||-9%||-61%|
|60 - 89||1.58%||0.46%||0.41%||0.36%||-13%||-23%||-78%|
|90 - 180||2.98%||0.72%||0.52%||0.46%||-11%||-36%||-85%|
Note: Data is for Q1 of each year
U.S. Mortgage Snapshot
The average U.S. mortgage debt per borrower for Q1 2019 was $202,284, a 2.4% year-over-year increase for 2019.
Rising mortgage debt is no surprise when looking at housing cost increases compared with income growth. The average sales price for new homes increased 46% over the past 10 years, according to U.S. Census Bureau data and Federal Reserve Economic data, while the median household income has increased just 3% during the same time period.
Mortgage Snapshot Q1 2019
Average Mortgage Debt: $202,284
Median Home Selling Price: $234,500
Average 30-Year Interest Rate: 4.37%
Source: Experian, Zillow, Freddie Mac
Subprime mortgage debt increased 1.4% in the first quarter of 2019 with an average balance of $161,408.
Mortgage Debt by State
Residents of Washington, D.C., carried the highest average mortgage debt for the second year in a row, at $416,848 per borrower. California ranked second, followed by Hawaii, Washington state and Colorado.
At the other end of the spectrum, homeowners in West Virginia owed the least on their homes, with an average of $110,158 in mortgage debt. Indiana, Mississippi, Ohio and Kentucky rounded out the five states with the lowest mortgage debt.
Mortgage debt in Louisiana rose more than any other state year over year, with a 4% increase in Q1 2019. Next in line with highest increases were Texas, Utah, Colorado, Idaho and Massachusetts.
In fact, every state saw an increase to its average mortgage debt except Connecticut and New Mexico, whose average balance decreased by less than 1%.
|Average Mortgage Debt by State|
Note: Data is from Q1 of each year
Mortgage Debt by Metro Area
California was home to the top eight markets with the highest mortgage debt in the U.S., according to Q1 2019 Experian data. San Jose-Sunnyvale-Santa Clara, California, had the highest average mortgage debt, at $519,576. Rounding out the top five markets with the most mortgage debt were San Francisco-Oakland-Fremont, California; Santa Barbara-Santa Maria-Goleta, California; Los Angeles-Long Beach-Santa Ana, California; and Santa Cruz-Watsonville, California.
Homeowners in Danville, Illinois, owed the least on their homes, with an average of $70,964 in mortgage debt in Q1 2019. It was followed by Johnstown, Pennsylvania, with $71,269; Weirton-Steubenville, West Virginia-Ohio, at $75,878; Terre Haute, Indiana, with $79,281; and Youngstown-Warren-Boardman, Ohio-Pennsylvania, at $84,664.
When looking at mortgage debt changes by metro area, Texas held four of the top five markets with the biggest increases in the past year. The top spot went to Bowling Green, Kentucky, however, as its mortgage debt increased 8.4%. The next four spots, all in Texas, were Sherman-Denison, with an 8.1% increase; Odessa, with a 7.4% increase; Midland, at 6.9%; and Brownsville-Harlingen, with an increase of 6.4%.
|Top 50 Markets With the Highest Average Mortgage Debt|
|San Jose-Sunnyvale-Santa Clara, CA||$499,869||$519,576||3.9%|
|San Francisco-Oakland-Fremont, CA||$466,883||$480,531||2.9%|
|Santa Barbara-Santa Maria-Goleta, CA||$412,203||$411,904||-0.1%|
|Los Angeles-Long Beach-Santa Ana, CA||$400,113||$409,315||2.3%|
|Santa Cruz-Watsonville, CA||$389,135||$395,552||1.6%|
|San Diego-Carlsbad-San Marcos, CA||$378,975||$386,530||2.0%|
|Oxnard-Thousand Oaks-Ventura, CA||$377,976||$384,864||1.8%|
|Santa Rosa-Petaluma, CA||$349,252||$358,649||2.7%|
|San Luis Obispo-Paso Robles, CA||$336,903||$342,846||1.8%|
|New York-Northern New Jersey-Long Island, NY-NJ-PA||$296,465||$302,484||2.0%|
|Naples-Marco Island, FL||$269,043||$266,973||-0.8%|
|Riverside-San Bernardino-Ontario, CA||$253,640||$258,744||2.0%|
|Fort Collins-Loveland, CO||$239,630||$247,553||3.3%|
|Salt Lake City, UT||$223,316||$233,130||4.4%|
|Miami-Fort Lauderdale-Pompano Beach, FL||$223,034||$228,821||2.6%|
|Austin-Round Rock, TX||$218,194||$228,108||4.5%|
|Colorado Springs, CO||$216,858||$225,859||4.2%|
|Santa Fe, NM||$222,765||$223,871||0.5%|
|Las Vegas-Paradise, NV||$216,589||$223,396||3.1%|
|Charleston-North Charleston, SC||$215,800||$223,124||3.4%|
|Barnstable Town, MA||$217,711||$221,998||2.0%|
|Mount Vernon-Anacortes, WA||$211,850||$218,333||3.1%|
Note: Data is from Q1 of each year
Your mortgage debt appears on your credit report and is one of many factors that can influence your credit scores. Most credit scores consider the total amount of debt you have, your credit mix (types of debt), inquiries for new credit, and your payment history.
Making mortgage payments in full and on time, every time will help you build a positive payment history and can improve your credit scores, whereas missing payments or paying less than the full amount owed can harm your scores.
If you're ready to take on a mortgage, check out our resources on what to do to prepare for buying a home and learn more about good credit scores. While there are no set minimum credit scores to buy a house, having higher credit scores will increase the likelihood you'll be approved for a mortgage and save money on lower interest rates.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.
This article was originally published on July 16, 2019, and has been updated.