Buying a home has become more difficult in recent years due to a surge in prices and interest rates — and mortgage debt has grown, as well.  A 2021 report from the credit reporting company, Experian, broke down outstanding mortgage debt by generation and found the average millennial owes 11% more on their mortgage than the average U.S. homeowner.
Matthew Frankel, contributing analyst for The Motley Fool, joins Cheddar News' Closing Bell to discuss.

Closing Bell

Mortgage Debt Grows For Millennials & Gen X Amid Challenging Housing Market

Okay, well buying a home has become more difficult in recent years due to surge in prices and interest rates, mortgage debt has grown as well. In a 2021 report from the credit reporting company experience breaking down outstanding mortgage debt by generation, finding that the average millennial owes 11% more on their mortgage than the average US home owner. So joining me now is Matthew frankel contributing analyst for the motley fool. Matthew, thank you so much for coming on. Of course your company is a financial and investing advice firm and you recently wrote an article on this very topic. So what did you find about the current state of mortgage debt in the US and what it means for millennials? Yes, a mortgage debt is up across the board. It's due to a combination of factors. So the average millennial owes 255,000 and some change on their mortgage, that's up 10% over 2020 levels and 16% over 2019 levels. It's not only the rising home prices, home prices are up 2020.7% year over year in the us, but also due to the elevated refinancing activity. We've seen over the past few years, mortgage rates have been at record lows. A lot of homeowners have decided to take equity out of their house for various projects or expenses. So we're seeing this really kind of drive up mortgage debt, but that's kind of a deceptive statistic that the average millennial owes 255,000 because that includes people who have owned their homes for years and have been paying on their homes for years. The average new mortgage according to the mortgage bankers association Is for $413,500. So homes are definitely becoming less affordable for millennials and it's not just the homes, it's the mortgage rates as well, mortgage rates have roughly doubled over the past year. Um, so that's driving up monthly payments on comparable homes significantly. And a lot of homeowners are just gonna hit with sticker shock when they see the, when they talk to their mortgage. So as rates rise prices still elevated, what should prospective homebuyers do in this environment? Well, there is some good news. It looks like the more the, the home market is starting to cool off a little bit. We saw that June had 15% of the contract signed in June fell through average listing price is that finally started to fall back from their peak, which was reached in the spring. And we're seeing a lot fewer bidding wars. I'm sure you've heard stories about how homes are going for 10% over asking price in certain markets and things like that. We're seeing a lot less of that as we head into the summer. So there's some good news, your best move is to talk to a local real estate professional that really has a lot of experience with first time buyers and It's really just a buyer's agent that really knows how to negotiate on your behalf because it can still be a good time to buy a home mortgage. If you told me that credit card debt was up by 11% over a year, I'd be much more concerned. But mortgage debt is generally considered a good kind of debt. It's backed by an appreciating asset and if you're ready to plant roots, don't let the necessarily let the higher prices scare, you away. interesting. Now, I do want to ask you one other question when people are looking at the options available to them in the mortgage market knowing that rates are likely to rise even further from here, how should prospective buyers be looking at adjustable mortgages, adjustable rate mortgages? Is that something that you might recommend? People give a look at? I would recommend a look for certain buyers, but you have to know the risks, adjustable rate mortgages are definitely more affordable right now than fixed rate, which hasn't been the case over the past couple of years. Um, you can get an adjustable rate mortgage now for say 4.5% as opposed to almost 6% for a fixed rate, 30 year mortgage that can make a big difference with your monthly payments. You generally lock that rate in for any time anywhere between five and 10 years. So you have to be aware of how the rate resets, how often it resets And what can happen if it does because lack of knowledge about that is what led to the 2000 and 2009 meltdown. That's right. Gotta be careful. That's for sure. Matthew Frankel, contributing analyst for the molly full. Matthew. Thank you.