Home mortgage debt rose in the third quarter of this year for the first time since the end of 2008, according to a new report from the Federal Reserve.
It is a healthy sign for the housing market, arguably, but it is not exactly what it seems at face value. Mortgage debt is growing largely because banks are foreclosing on fewer homes, thereby wiping away less debt.
During the last few years, record-low mortgage rates prompted millions of Americans to refinance their home loans, but a sluggish market, dominated by all-cash investors, kept loans to purchase a home in the negative. That too, however, is beginning to change.
Spring could also bring a new surge in sales, as potential buyers gain confidence from rising prices, but buyer demand will be hit head-on by a new mortgage landscape. The Federal Housing Administration (FHA), the government’s insurer of home loans, just announced it would be lowering its loan limit in the very highest cost areas from $729,750 to $625,000, starting Jan. 1, 2014.
Read the full report here.