The mortgage and housing markets continue to navigate choppy waters, with Intercontinental Exchange, Inc. (ICE) experts flagging signs of early price correction, rising negative equity risk in select markets, and continued affordability strain.
Speaking during the July edition of ICE’s Monthly Mortgage Monitor presentation, Andy Walden, vice president of research and analysis, and Gunnar Blix, ICE's housing market research manager, unpacked a wide array of indicators — from mortgage performance and origination trends to student loan impact and home price direction.
Highlights from the discussion include:
1. Mortgage Performance: Stable But Diverging
Overall delinquency rates dipped slightly in May, with serious delinquencies falling for the fifth consecutive month. However, FHA loans remain a pain point, with non-current rates now 250 basis points above 2019 levels. VA loans also show stress, while GSE and portfolio loans remain relatively strong.
“Delinquencies were modestly up from the same time last year,” noted Walden. “We’ve got about 110,000 more delinquent mortgages than we had in May of 2024, 56,000 more serious delinquencies, and 15,000 more loans in active foreclosure.”
“FHA is now the main source of funding for borrowers with lower credit scores and low down payments,” Blix said, noting that was expected. “This is where we’re seeing more financial stress,” he added.
2. Student Loan Repayments Resume — Risk on the Horizon
With federal student loan collections having restarted in May 2025, serious delinquencies on those loans have surged to 31%. ICE data show 20% of mortgage holders also carry student debt — with a clear link between student loan delinquency and elevated mortgage delinquency risk.
“The Department of Education officially resumed [student loan] payments in January 2025, but then importantly also resumed collection efforts on defaulted student loans on May 5, 2025, following a five year pause,” Walden pointed out.
3. Affordability Crunch Worsens
The average debt-to-income (DTI) ratio remains near record highs. In May, back-end DTI hit 40%, only marginally below last year’s peak. Driving DTI up are interest rates and home prices, with non-mortgage related expenses factoring into the mix including auto loans, credit card debt, and student loans.
The average purchase credit scores remain elevated at 738, reflecting tight underwriting even amid high borrower stress.
4. Inventory Rebounding Quickly — Softening Prices to Follow
National housing inventory is up 32% year over year. ICE projects a return to pre-pandemic inventory levels by fall 2025 if trends continue, signaling a cooling in prices. Markets like Denver and multiple California metros are already at or above pre-2020 inventory levels. Areas where inventory returns to normal could be ripe for price softening.
5. Prices Tread Water — But Condos Hit Hard
National home price growth slowed to just +1.3% year over year in June. Seasonally adjusted month-over-month price growth was effectively flat. More than 25% of major markets are now experiencing annual price declines — especially in Sunbelt and West Coast metros.
Price declines are localized. Some 41 markets saw monthly price declines on a seasonally adjusted basis in June, noted Blix, with Cape Coral, Fla. leading the way with prices down 9.3% annually.
Condos are under particular pressure, with several Florida markets seeing declines for condos of 10-13%.
6. Negative Equity Risk Rising In Hotspot Markets
While national negative equity remains low (1%), it’s climbing in newer loans and vulnerable geographies. FHA and VA loans dominate the limited equity landscape. Cape Coral, Fla., for example, shows a 70% negative equity rate among FHA loans originated in recent years.
“Nine out of 10 loans that are underwater were originated in 2021 or later,” Walden said, “and four out of five were originated in 2022 or later.”
7. Buyer Demand Holding Firm — For Now
Despite affordability challenges, purchase applications remain strong, especially compared to recent years. There's been a shift toward affordability-driven products, like adjustable-rate mortgages and temporary buydowns.
8. Operational Efficiencies Improving
The average loan closed in 41 days in May — the fastest ICE has seen in over six years, despite volumes being modestly up from last year. This suggests lenders are improving their processes, a positive sign for long-term competitiveness.
