2022-2024 Buyers Are Between a Rock and a Hard Place

[Michael Carbonare]

A lot of 2022–2024 buyers are trapped in a vice most people can't see yet.

They bought at the peak. High price, high rate, thin down payment. Many of them FHA, 3.5% down.
Then prices in their metro slipped 5% . . .10%. . .
Not surprisingly FHA delinquency hit 11.52% in Q4 2025, the highest since 2021.

In some markets it's not a minority problem anymore.
In Cape Coral, roughly 70% of 2023–2024 FHA loans are underwater.
In Austin, 65% of 2022 FHA loans.
In North Port, 57% of 2023 loans.
Meanwhile rent, the backup plan, is going in the wrong direction. Professionally managed apartment rents fell 0.6% year-over-year in Q4 2025, driven by the West and South, the same regions where new supply has been concentrated.

These sellers. . .
Can't sell without bringing cash to the table
Can't refi, no equity to unlock
Can't cover the note with rent
One job loss, medical bill, or rate reset away from forced action

Negative equity nearly doubled in a year. About 1.2 million homeowners, 2.1% of all mortgages, up from 1.3%. That's more than a headline stat. It's a pipeline. (Foreclosure Data Hub)
This is exactly the setup that turns into a short sale. Not because they're bad owners, but because the math stopped working and nobody offered them a third option before the bank did.

If you're holding one of these properties right now, you already feel it. The listing that isn't moving. Today's tenant paying less than last year's tenant. The math you keep redoing, hoping it changes.

What are you seeing in your market? Are rents actually falling, are foreclosures back on the radar, are short sales becoming hot again?

[Stuart Udis]

This issue extends beyond the examples you provided, although the nearly 100% financed buyers are certainly trapped in most instances. As an example, when rates were 2% those qualifying for $550K purchases in a neighborhood I'm active in had income levels that historically supported less expensive housing. While the loan payments have remained a constant, other costs associated with owning the $550K home example have continued to increase and that's caused additional strain on the homeowner.

Unfortunately, the way the mortgage industry & particularly financing for owner occupants works pours fuel on this issue because the analysis takes a snapshot of what the costs of ownership are on the day the loan settles, and these origination companies already have a servicer lined to up to sell the loan so they are not concerned with the long-term ramifications