Research says that on average we lie at least two times every day. Was this statement by President Biden on July 19, 2022 one of those times? "Today’s economic report shows that we are making progress on bringing down inflation while maintaining a strong job market. Unemployment remains at a near-historic low. While some prices are still too high, the worst of inflation is behind us." Or was the claim that his administration was bringing down inflation and the worst was behind us an obfuscation of what lay before us?
To address the present financial pressure on homeowners due to rising escrow demands and mortgage rates over the past 3.5 years, look at “fact-based” data on percentage increases in property taxes, average salary increases, and mortgage default rates.
It is never enough…
Property Taxes: From late 2020 to mid-2024, property taxes in major cities have increased significantly. On average, property taxes have risen by about 6-10% annually. Over 3.5 years, this can compound to a total increase of approximately 23-36%.
Mortgage Rates: Mortgage rates have also increased, especially since 2022, with average rates rising from around 3% in early 2021 to over 6% by mid-2024. This represents an increase of over 100%.
Have salaries kept pace?
According to data from the Bureau of Labor Statistics and other economic reports, average salaries have seen a nominal increase of about 3-4% annually over the past few years. Over 3.5 years, this amounts to a cumulative increase of around 10-14%.
Adjusted for inflation, real wage growth has been much lower, and in some sectors, wages have not kept pace with inflation, leading to a decrease in real purchasing power.
The spiral takes some down the tubes.
Mortgage default rates have seen an uptick in recent years, especially with economic challenges such as inflation and higher interest rates. While exact figures can vary, the overall mortgage delinquency rate increased from around 3.5% in 2020 to about 4-5% in 2023.
Specific data from the Mortgage Bankers Association shows that serious delinquency rates (loans 90 days or more past due or in foreclosure) have also increased slightly during this period.
Escrow and Mortgage Rates: The combined increase in property taxes and mortgage rates has significantly raised the cost of homeownership. Over the past 3.5 years, homeowners have seen escrow demands rise by approximately 23-36%, with mortgage rates doubling.
Salary Growth: In contrast, average salary growth has lagged, with cumulative nominal increases of about 10-14%, which is not sufficient to match the rise in housing costs when adjusted for inflation.
Mortgage Defaults: Higher housing costs and insufficient wage growth have led to increased financial strain on homeowners, contributing to a rise in mortgage defaults and delinquencies.
Recount:
Escrow Increase: 23-36% over 3.5 years.
Mortgage Rate Increase: From ~3% to over 6%, a rise of over 100%.
Average Salary Increase: 10-14% nominally over 3.5 years.
Mortgage Default Rate Increase: From 3.5% to about 4-5%.
The financial pressure on homeowners due to rising escrow demands and mortgage rates has outpaced salary growth, leading to increased mortgage defaults. This indicates a challenging economic environment for many homeowners, where their income growth has not kept up with the rising costs of maintaining homeownership. These troubling times require truth, transparency, and trust from those we have ascribed leadership roles to…If a corporate CEO pushed bunk like that, despite their fiduciary responsibility to shareholders, that job would be in jeopardy.
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