Price Declines Aid Home Affordability, But Concerns About Equity Persist

Falling home prices could be a positive sign for sidelined buyers, but recent homeowners who have yet to accumulate equity could be at greater financial risk
July 7, 2025
2 min read
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Assessing the financial risks of purchasing a home in current market conditions
Despite more affordability in the housing market, young homeowners could be at greater financial risk.

With slowing home price growth, the market continues to tilt in favor of homebuyers, but that doesn’t mean owning a home is without its challenges. Those who purchased a home recently could be subject to financial distress despite relative stability in the current housing market, according to financial services company Intercontinental Exchange's (ICE) July 2025 Mortgage Monitor report.

In early June, home price growth slowed to 1.3% nationwide, and nearly one-third of markets experienced price declines by a full percentage point. While this news could be beneficial for overall housing affordability, negative equity is a growing concern among recent homebuyers, many of whom used FHA and VA loans that can sometimes hinder the speed at which equity builds.

While the slowdown in home price growth may be easing affordability pressures, and negative equity volumes remain low, we’re beginning to see localized pockets of recent homebuyers becoming financially exposed. Borrowers with minimal equity — particularly those who purchased recently — are often the first to be exposed when home prices soften.

- Andy Walden, head of mortgage and housing market research at ICE

Young homeowners are considered the most 'financially exposed'

Nationwide, about one in four seriously delinquent mortgages would result in negative equity if the home were sold at distressed prices. However, the financial risk is even greater for young first-time homeowners, many of whom are also experiencing the restart of federal student loan payments following a five-year hiatus. Nearly 20% of mortgage holders also have student loan debt, with that figure climbing to nearly 30% among FHA borrowers. Additionally, those behind on student loan payments are four times more likely to also be behind on their mortgage.

Negative equity isn’t the only concern young buyers have

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