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Why Can’t Americans Pay their Mortgage?

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This line chart shows the financial reasons for new 90+ day mortgage delinquencies.

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Why Can’t Americans Pay their Mortgage?

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A rising cost of living is making it difficult for Americans to pay off their mortgage debt, or even purchase a home altogether.

Yet interestingly, mortgage delinquencies are at near-record lows. In the first quarter of 2024, the proportion of single-family residential mortgages in delinquency fell to 1.7%. By comparison, delinquencies spiked more than 11% during the global financial crisis. This resilience is partly due to homeowners locking in low rates before interest rates surged, sheltering them from the higher cost of paying off debt.

This graphic shows the financial reasons that Americans can’t pay their mortgage in 2024, based on data from the U.S. Department of Housing and Urban Development.

The Financial Reasons Driving Mortgage Delinquencies

Below, we show the financial reasons contributing to new mortgage delinquencies of 90 days or more on single-family homes:

Fiscal Quarter% Citing Reduction of Income% Citing Unemployed% Citing Excessive Obligations
2024 Q227.211.218.1
2024 Q125.29.517.4
2023 Q425.78.116.6
2023 Q323.16.414.7
2023 Q219.35.312.6
2023 Q116.64.511.9
2022 Q414.33.911.0
2022 Q311.33.19.6
2022 Q29.12.57.7
2022 Q17.42.16.7
2021 Q46.92.16.0
2021 Q35.92.04.7
2021 Q25.62.13.9
2021 Q15.62.03.6
2020 Q45.01.82.7
2020 Q36.01.92.9
2020 Q217.64.315.4
2020 Q121.64.518.4
2019 Q425.45.321.7
2019 Q326.85.822.2

Despite a strong labor market, the share of Americans citing a “reduction of income” was the highest overall, sitting at pre-pandemic levels.

Often, cash-flow problems spurred by negative life events are the primary catalyst for mortgage delinquencies. A separate study shows that they were responsible for 70% of underwater mortgage defaults between 2008 and 2015, while strictly negative equity caused just 6% of these defaults. Underwater mortgages are defined as those where the principal owed on a home is worth more than the home value.

In many ways, this challenges the previously held belief that negative equity heavily triggered U.S. mortgage delinquencies during the global financial crisis.

Following next in line were excessive obligations, accounting for over 18% of responses in the second quarter of 2024. This figure has more than doubled over the last two years, at a time when credit card and auto loan delinquencies are at 10-year highs. In fact, Americans’ interest payments on non-mortgage debt now costs as much as mortgage interest payments for the first time ever.

Shielded from High Interest Rates

Looking ahead, the prospect of rising mortgage delinquencies remains uncertain.

Today, 96% of American homeowners have fixed mortgage rates, which often extend through the life of the loan. Many of these are more than 10 years, meaning that higher mortgage costs may not be a primary driver of bad loans for some time. Instead, rising unemployment or an economic downturn could have a more immediate and substantial impact on American homeowners in the future.

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