Kansas City Homeowners This Fall Have More Financial Strength Than They Have Ever Had Since 1983

The housing market is on just about everyone’s mind these days. That’s because the HOT Seller's Market since 2020 is behind us, and the changes are being felt. The question now is, just how financially strong are homeowners throughout Kansas City? Loan debt from mortgages grew beyond 10 trillion dollars over the past year, and many economists called that a troubling sign because it had never happened.

Recently Odeta Kushi, Deputy Chief Economist at First American, answered that question when she said:

“U.S. households own $41 trillion in owner-occupied real estate, just over $12 trillion in debt, and the remaining ~$29 trillion in equity. The national "LTV" in Q2 2022 was 29.5%, the lowest since 1983.”

She continued on to say:

“Homeowners had an average of $320,000 in inflation-adjusted equity in their homes in Q2 2022, an all-time high.”

What Is LTV?

The financing term LTV refers to the loan to value ratio. It compares the size of the mortgage to the value of the home. If a $400,000 home has a $320,000 mortgage, the LTV or loan to value is 80%. 

The LTV can also be used in terms of down payment. If a buyer is purchasing a $400,000 home and they are putting $80,000 down, their LTV is 80%.

Why Is This Important?

This is yet another reason why we won’t see the housing market crash in Kansas City. Yes, we will see some equity losses, but we will not see a housing crash in Kansas City like the housing crash between 2006-2011. Unlike during the last crash, homeowners today have more equity in their homes and this extra equity gives today’s homeowners much more control.

Let's look at an example. Let's say you got a new job this fall and had to move to a new city or you are getting divorced and are being forced to sell. In today's real estate market, you have equity in your home so you can adjust your list price to attract a buyer. Sure you will not net as much as you would have 6 months ago, but a least you have some equity to help absorb the loss. During the last housing crash, many homeowners did not have much equity in their homes and when they were forced to sell, they needed to bring money to closing. And many of the homeowners did not have enough funds in the bank to absorb their loss.

Bottom Line

Kansas City homeowners this fall have more financial strength than they have had since 1983. This is a combination of how homeowners have handled their equity since the housing crash and the high appreciation of home values since 2020. Despite all of the negative real estate news, this is another reason why homeownership makes sense.