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Is Family Mortgage Debt Out of Control?

Some homeowners have recently done a “cash out” refinance and have taken a portion of their increased equity from their house. Others have sold their homes and purchased more expensive homes with larger mortgages. At the same time, first-time buyers have become homeowners and now have mortgage payments for the first time.

These developments have caused concern that families might be reaching unsustainable levels of mortgage debt. Some are worried that we may be repeating a behavior that helped precipitate the housing crash ten years ago.

Today, we want to assure everyone that this is not the case. Here is a graph created from data released by the Federal Reserve Board which shows the Household Debt Service Ratio for mortgages as a percentage of disposable personal income. The ratio is the total quarterly required mortgage payments divided by total quarterly disposable personal income. In other words, the percentage of spendable income people are using to pay their mortgage.

Is Family Mortgage Debt Out of Control? | MyKCM

Today’s ratio of 4.44% is nowhere near the ratio of 7.21% during the peak of the housing bubble and is instead at the lowest rate since 1980 (4.38%).

Bill McBride of Calculated Risk recently commented on the ratio:

“The Debt Service Ratio for mortgages is near the low for the last 38 years. This ratio increased rapidly during the housing bubble and continued to increase until 2007. With falling interest rates, and less mortgage debt, the mortgage ratio has declined significantly.”

Bottom Line

Many families paid a heavy price because of questionable practices that led to last decade’s housing crash. It seems the American people have learned a lesson and are not repeating that same behavior regarding their mortgage debt.

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About Area

Blairsville, Georgia is a small mountain town located in the beautiful Blue Ridge Mountains. Widely known for being one of the most desirable destinations for outdoor adventurers, people come to Blairsville for mountain biking, hiking, fishing or just to marvel at the perfect beauty of nature. A large portion of the area is in the Chattahoochee National Forest, and therefore, will remain untouched and naturally serene and beautiful. In 1942 Lake Nottely was created by the Tennessee Valley Authority for power production. The resulting 4,180 acre lake today is a source of Summer fun, with boating, fishing and swimming abundant, and the river that feeds the lake offers some of the best trout fishing in the state. Vogel State Park, located just outside of town, is centered around Trahlyta Lake and Trahlyta Falls. With rustic cabins on site, and primitive camp sites, you can stay for days or weeks and enjoy swimming, paddle boating and fishing in the lake, hike to the falls, or even play putt-putt. Just beyond Vogel State Park are several more waterfalls with hiking trails and areas to camp, fish, or play in the creek. In addition to all of the majestic waterways running through the valleys, the highest elevation in the state of Georgia is in Blairsville, on top of Brasstown Bald Mountain. Here, you can hike up to the visitor’s center (or take a shuttle) where you have a 360⁰ view, and can see four different states on a clear day, have a picnic, visit the gift shop, and if you’re feeling adventurous, take one of the longer hiking trails, one of which leads to the Appalachian Trail. You won’t be surrounded by department stores or chain restaurants in Blairsville, but you can find handcrafted, original creations in the small shops, or if you visit the Farmer’s Market or one of the many festivals throughout the year. This is certainly a beautiful and unique town worth seeing, perhaps you’ll even want to stay, and if that’s the case, contact your Century 21 Scenic Realty. We are always here for you!

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