Managing the modern mortgage myths

Transcript:

Molly Boesel:

When we track investor purchases, we look at small investors. Those are ones that own between 3 and 9 properties, and they are the ones who have purchased the most investment properties. So, of all the homes purchased in 2025, investor or non-investor, small investors purchased 15% of all homes purchased in 2025.

Maiclaire Bolton Smith:

Welcome to Beyond the Buildings by Cotality. I am your host, Maiclaire Bolton Smith, and I'm just as curious as you are about everything that happens in the property industry. On this podcast, we satisfy our collective curiosity, explore questions from every angle, and look beyond the obvious. With every conversation, we illuminate what is possible. Buying a home today is complicated. Between a lack of affordable inventory and environmental risks that can limit insurance accessibility, there's a lot for investors and homeowners to think about. Government policies and new technologies are changing the market every day. Then there are the headlines that announce a market dominated by investors and homeowners on the verge of delinquency. It can be hard to sift through the noise and see the trends clearly. To make decisions with assurance, you need to separate the facts from the rumors. So today, we're clearing up the confusion. We're going to look at the real data and bust 5 of the biggest myths in the housing market. To do that, we've invited back Cotality Senior Principal Economist, Molly Boesel, to the show. Molly, welcome back to Beyond the Buildings.

Molly Boesel:

Thank you, Maiclaire. It's great to be here, and I love to bust these myths.

Allie Barefoot:

Before we get too far in this episode, here's a friendly reminder about how to see what's coming up next in the property market. To make it easy, we curate the latest insight and analysis for you online. Find us using the handle @Cotality on all of our social media channels. But now, let's get back to the show.

Maiclaire Bolton Smith:

I know, this is one of my favorite topics to do with you. So, okay, let's see where we are. So, number one: A surge in cash-out refinancing. So, this is a big one I hear about so much right now. Why is there suddenly a concern of people going to cash out? Won't that change their interest rates that they might be locked in on?

Molly Boesel:

Yeah, yeah. So, you know, we might see cash-out refinances going up a little bit, but they're coming up from a pretty low level. So I think that's where we've got to set the stage there. And yeah, of course, when somebody cashes out and does a cash-out refi, they cash out their entire mortgage balance and get more back on that. So yeah, you would have a reset of your mortgage rate.

Maiclaire Bolton Smith:

Okay. Are we seeing a lot of those right now, or not really?

Molly Boesel:

So, we've seen a little bit of an uptick in that. I think that's probably coming from borrowers who borrowed at the rates, you know, the increased rates from like 2022 to now. They might be cashing in a little bit to get take some of their equity out. So, a small increase.

Maiclaire Bolton Smith:

Now, what about other forms of equity extractions? So, things like HELOCs, the Home Equity Line of Credit. Something else that I recently heard about was an HEI, which we've never really talked about too...

Molly Boesel:

Mm-hmm. Home Equity Investments, right.

Maiclaire Bolton Smith:

Yeah! So, what about those type of things? Is that on the increase and maybe explain what the difference of those two is as well?

Molly Boesel:

Sure. A HELOC, a Home Equity Line of Credit, is you take out a line of credit, you may or may not extract it, right? You just have this like ability to take out. So maybe I want to... I don't know, we'll put a big number out there... renovate something or I know I have some expenses coming up. So I may take out a line of credit for, say, $100,000, you know, let's say. But maybe I never tap into it, maybe I never extracted anything, and it mostly goes unused. So that's a line of credit. A home equity loan is just taking a loan on the equity, so you need to pay that back, you know, like a regular loan. That's just a plain old second. And a Home Equity Investment is a little different. It's a shared equity product—we should probably do a whole other podcast on that sometime—it's not even really a loan, it's sort of when the home sells, that will be cashed in, I guess, by the investor. So they would share on any equity that is gained on the property.

Maiclaire Bolton Smith:

Okay. And are we seeing more people do those these days?

Molly Boesel:

We don't really have a good estimate of what the Home Equity Investments are, but with the home equity loans and the lines of credit, yeah, they're going up. They're at their highest level now since 2007. Now keep in mind, again, they're coming up from a pretty small number. So that's where we've got to set the context there. So yeah, they're up... let's see... up 70% since 2022, the home equity loans and home equity lines of credit. But they're still 30% below the peak from 2005 when there was a lot of equity extraction. So yeah, they're up, but they're still pretty low.

Maiclaire Bolton Smith:

Okay, so myth-busting! Not everybody is taking all of this cash-out refinancing on their home.

Molly Boesel:

Well, that's right. And when we look at the amount of equity that borrowers have, those with a mortgage only have about $11 trillion of tappable equity. So that means if they took all their equity out and still had about an 80 LTV, or 80% loan-to-value. So in 2025, with all that increase in HELOCs and home equity loans and cash-out refis, 95% of that tappable equity is still there. It's still intact. So while it's still up, on a national average, we're not in the danger zone, let's say, on equity coming out.

Maiclaire Bolton Smith:

Okay, good to know, good to know. Myth number two: A wave of delinquencies. So overall, delinquency rates have kind of edged up over the past, you know, two or three years according to the data that we collect here at Cotality. If we look at the job market right now, that's pretty lackluster. It's no wonder that there's more of a concern of this wave of delinquencies. Do you think this is going to continue to increase, and are we going to see maybe a spike that we haven't seen in recent years?

Molly Boesel:

Okay, so this is where I've got to set the context again on this myth-busting, right? Because yes, delinquencies are up. They are up, but they're up from very low levels. So, the overall delinquency rate was 2.6% in 2023, so that's where we hit a low. And that is loans that are 30 days or more past due. So of all mortgages out there, less than 3% are 30 days or more past due. You come to February of 2026, it's 3.2% are 30 days or more past due. So yeah, it's up, and if you look at kind of like a percentage increase, you know, that seems like a lot, but it's up from a very, very small level. But yeah, the lackluster job market and the inflation that we're seeing is definitely a concern for borrowers making paying their mortgages. And we've seen those increases in delinquencies across the country. So the 30+ days past due is up in 86% of metros. It's not just a few places that have had adverse delinquencies; it's up across the country. Foreclosures are up in about 50% of metros. So when you think about going up, yeah, I would expect that more borrowers will have trouble paying their mortgage, but it's still at a pretty low rate of delinquency.

Maiclaire Bolton Smith:

Okay, good to know. It's the big picture, just where we are.

Molly Boesel:

The big picture, yeah! Where we are now and where we've been just the past few years, yeah.

Maiclaire Bolton Smith:

Myth number three that we're going to debunk here, Molly, is The Silver Tsunami, which is all about inheritance here. There's this theory floating around that the baby boomer generation is on the verge of massive downsizing. And the thought is that when that happens, the market will be flooded with homes, and that prices will correspondingly decrease. Is the data indicating that that's actually going to happen?

Molly Boesel:

Yeah, so that is a good theory because there are a lot of baby boomers and a lot of them own homes. But we don't really see a large increase in inventories across the country right now. So we're not really seeing that they're all kind of listing at the same time. One reason is a lot of the older generation, they really would like to age in place. So you know, they like where they live, maybe they can get some in-home healthcare, age in place. They're also living longer than ever! So they may not want to... maybe downsizing would be what they want to do, but they're certainly not ready for, you know, that assisted living, because they're living a lot longer. And even say baby boomers all want to list their homes, I think there's nothing to support that they'll all do it at once. So if they do all start doing it at once, I think you'll see some prices softening, which would pretty quickly stop the rest of the baby boomers from listing their homes—they might pull them off the market if it softens too much. So it'd be more like a trickle of these homes coming on the market. And it may be more in certain areas. I mean, there's certainly some places in the country with a more older population, but again, I think once prices would soften due to higher supply, then I think they would slow that down.

Maiclaire Bolton Smith:

Okay, good to know.

Allie Barefoot:

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Maiclaire Bolton Smith:

Number four is Institutional Investors. So, we hear a lot about investors lately, and we've talked about it on this podcast as well, but specifically institutional investors. At the beginning of the year, there was an executive order to curb home buying by institutional investors, but who is really responsible for the majority of single-family home investment?

Molly Boesel:

Yeah, it is not institutional investors! I'll just say that real quick, but then I'll expand on that. So yeah, investors definitely have had a large presence. You can see where this idea would come from, you know, if we would limit investors buying, then maybe there'll be more supply and, you know, prices would be more beneficial for your first-time home buyer. So, when we track investor purchases, we look at small investors—those are ones that own between 3 and 9 properties—and they are the ones who have purchased the most investment properties. So of all the homes purchased in 2025, investor or non-investor, small investors purchased 15% of all homes purchased in 2025. So then we come down to your medium-sized investors that own between 10 and 100 at any one time: 12% of purchases were made to medium investors. Okay, so now we're up to 27%. And the rest are to, you know, large and mega. They make up about 3% each of investors. Large are 100 to 999, and mega have 1,000 or more. Okay, so yeah, at a national level, of course, 6% total of all purchases in 2025 going to those larger investors. You know, maybe that won't make a huge impact. It may impact some metros or some areas more than others; they do kind of concentrate in areas. And also large and mega investors often purchase with cash, so they have some advantages—they can waive contingencies, they can move faster, and all of that. So, you know, maybe on the margins it could impact things, but they are not making up most of the purchases.

Maiclaire Bolton Smith:

Right, okay. And Molly, what does it mean economically that most of the investors are actually kind of these small-time landlords?

Molly Boesel:

Yeah, so you know, a small-time landlord is going to face a lot of the financial pressures that a non-investor would, right? They most likely have a mortgage, they're interest-rate sensitive, they have these higher repair costs that a non-investor would have. You know, a large investor most likely has a list of people they can call at decent prices to do all their maintenance and repairs, but your small-time investors aren't going to have that. So they're going to act more like a non-investor, at least in terms of their mortgages.

Maiclaire Bolton Smith: Okay, okay.

Allie Barefoot: It's that time again! Cotality just dropped new numbers about what's happening in the housing market, and here's what you need to know. Usually, when mortgage rates start to dip, people flock to the safety of a 30-year fixed. But right now, the script has been flipped. Adjustable-rate mortgages, or ARMs, are actually surging, even as overall rates are cooling off. It sounds counterintuitive, right? But the Cotality data shows we've hit a cash-flow ceiling. With home prices still sitting at record highs, buyers are using ARMs as a tool rather than a last resort. The math is pretty eye-opening: in some markets, the gap between a fixed rate and a 5-year ARM is the difference between a denied and an approved on a loan application. In short, affordability is so tight that the short-term flexibility of an ARM has become the primary bridge to homeownership in 2026. You can see the full breakdown of the ARM surge and how it might impact your next move on our insights page. The link is in the show notes. And that's a sift! See you next time.

Maiclaire Bolton Smith:

And number five, Molly—the one that everybody has the most hopes of—is Interest rates of yesteryear. We keep hearing that we're hoping that interest rates will fall again to the record-low levels that we saw during the pandemic. Is that a realistic expectation, or do you just feel like they're currently settling right now?

Molly Boesel:

I'm going to use the word "plateauing" on interest rates. So I think they're going to stay about where they are now. Mortgage rates, at least the 30-year rate and even the 15-year rate, they're more dependent on what's happening with inflation, long-term Treasuries, and how much investors are going to demand a return for their mortgage-backed security investments. So, all those aren't looking favorable right now for mortgage rates to fall anytime soon. So, you know, we're going to bounce around maybe 6.25% and 6.5%, something like that, but I think like I said, more of a plateau.

Maiclaire Bolton Smith:

Not the good news that everybody would hope for to hear them fall again, but kind of realistic given the world we're in right now.

Molly Boesel:

I think so! And if somebody is waiting for that lower mortgage rate to purchase, they don't need to wait for that lower mortgage rate because, you know, they'll probably stabilize where they're going to be for a little while.

Maiclaire Bolton Smith:

Okay, good to know. Well, Molly, it's always fun doing this myth-busting with you, so thank you so much for joining me today on Beyond the Buildings by Cotality.

Molly Boesel:

Yes, thank you very much, Maiclaire. It's great to be here.

Maiclaire Bolton Smith:

And thank you for listening! I hope you've enjoyed our latest episode. Please remember to leave us a review and let us know your thoughts, and subscribe wherever you get your podcast to be notified when new episodes are released. And thanks to the team for helping bring this podcast to life: producer Jessi Devenyns, editor and sound engineer Romie Aromin, our facts guru Allie Barefoot, and social media duo Sarah Buck and Makaila Brooks. Tune in next time for another conversation that illuminates the ideas that will define the future.

Allie Barefoot:

You still there? Well, thanks for sticking around. Are you curious to know a little bit more about who we spoke with today? Molly Boesel is a Senior Principal Economist in the Office of the Chief Economist at Cotality. She's responsible for analyzing and forecasting housing and mortgage market trends, including the single-family rental market. She has a depth of expertise in mortgage market analysis, model development, and risk analysis in the housing finance industry. Her original research appears on the Cotality Insights blog, which can be found at cotality.com/insights.