Are you set up for success in 2016? Join 2,500 real estate industry leaders Aug. 4-7, 2015, at Inman Connect in San Francisco. Get Connected with the people and ideas that will inspire you and take your business to new heights. Register today and save $100 with code Readers.
Takeaways:
- Mortgage holders are carrying an average of $25,000 nonmortgage debt per borrower.
- Nonmortgage debt is worth watching, as it has a direct impact on the lending and housing industries.
- Auto-related debt is cited as the primary driver of nonmortgage debt increases, accounting for 81 percent; student loan debt is also at an all-time high.
Mortgage holders are carrying more nonmortgage debt than at any point in the past 10 years, with an average of $25,000 per borrower.
According to Black Knight Financial Services, this figure is $1,400 more than the average one year ago — and nearly $2,600 more than in 2011.
Nonmortgage debt is worth watching, as it has a direct impact on the lending and housing industries.
“Nonmortgage debt is another key piece of the home affordability puzzle,” said Ben Graboske, SVP for Black Knight Data & Analytics. “The more total debt borrowers are carrying and the higher monthly nonmortgage payments they have, the less money they have to put toward a new home purchase, or potentially even their current mortgage obligations.”
Auto-related debt is cited as the primary driver of nonmortgage debt increases. This type of debt accounted for 81 percent of the overall nonmortgage debt increase spanning the past four years.
Student loan debt is also at an all-time high, with 15 percent of mortgage holders carrying it. The average balance is nearly $35,000.
Black Knight pointed to a correlation between nonmortgage debt and borrowers inquiring about a new mortgage, with those who have recent mortgage inquiries on their credit reports carrying nearly 40 percent more debt than borrowers who do not.
The report also looked at the current state of negative equity among U.S. mortgage holders and found continuing improvement.
“Over the first five months of 2014, we saw the number of underwater borrowers decrease by 20 percent,” Graboske said, representing 6.1 percent of active mortgages.
This decrease means more than 1 million fewer borrowers are in negative equity positions than at the start of this year.
In California, 1 out of every 3 borrowers entering the year underwater on their mortgage is no longer in a negative equity position.
But there also remain markets where underwater homes account for a noticeable percentage of all active loans. In Florida, nearly 500,000 borrowers — 11.9 percent of all loans — still find themselves underwater.
Other states with the highest percentage of underwater homes include:
- Nevada (13.7 percent)
- Illinois (10.4 percent)
- Ohio (9.7 percent)
- Georgia (8.2 percent)
- Arizona (7.5 percent)
- Wisconsin (7.3 percent)
- Michigan (7.1 percent)
- Alabama (7 percent)
