Economic indicators are increasingly signaling risks in the 2025 housing market, predominantly due to rising debt-to-income ratios (DTIs). Current DTI averages are at 40.5%, suggesting finances are tight, especially for lower-income borrowers. Hazard insurance costs have escalated significantly, surpassing wage growth and further squeezing budgets. Consumer debt stress is also heightening risk factors, with alarming rates of delinquency across credit cards, auto loans, and student loans. Without addressing these financial strains, particularly for households with high DTIs, mortgage defaults could rise, making the housing market precarious.
"With total household debt at $18.04 trillion in 2024, these pressures threaten to spill over to mortgage payments, especially for high-DTI households."
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