Last week, it seemed, the big news in the real estate/mortgage world was that conforming loan limits were increased for 2019. Without a doubt, that is interesting and tells us that, among other things, the housing market continues to strengthen and our economy continues to improve. I’ll pause here for you to do the happy dance.
Depending on your part of the country or your market in which you specialize, you may be dealing regularly with homes that require a mortgage a little shy of $500K so the conforming loan limit being raised is a huge deal. However, if you are working with homes regularly and decidedly south of that price point, this could be like trying to make a big deal to people living in Tucson, Arizona that the cost of down-filled parkas has significantly dropped.
Let me put up three statistics I recently came across that, I believe, will have more universal significance:
Stat #1: According to the US Census Bureau, 30.3% of homes owned in our nation have absolutely no mortgage on them – they’re owned free and clear.
Stat #2: According to a new report from ATTOM Data Solutions, dated November 8, 2018, 14.5 million homes are “equity rich.” In plain English, that means that 14.5 million homes here in the United States that have mortgages on them have AT LEAST 50% equity in them! That number represents 25.7% of the homes in the United States.
Stat #3: According to the same ATTOM report, only 8.8% of homes in the United States are “under water” (the value of the home is 25% less than what is owed on the home) as of the end of the third quarter of this year. The previous quarter of this year, the number was 9.3%. That drop from 9.3% to 8.8% represents over 200,000 homes in just one quarter!
These three statistics can be boiled down to this: if you took 100 homes in a neighborhood to target through door knocking, direct mail, or some other way of looking for new clients, less than nine of those homeowners will be under water and probably not a good candidate. Conversely, though, 56 of those homeowners (30.3% who have no mortgage, thus a boatload of equity, and 25.7% who have 50% of more in equity) will be prime candidates to approach about buying an income property or a vacation home using the equity in their primary home to finance the down payment. The few agents I know who use this data as I’ve described it have significantly increased their production. In fact, most of them began with just their past clients and built on their success quickly from that simple starting point. That makes a lot more sense (and money) than beating the drum about conforming loan limits, right?