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33 November 2025 November 2025 » C O V E R S T O R Y when you get mortgage industry folks together, it can be a bit disconnected to my ears. The industry folks will be like, well, I'll just keep that home and rent it out. That's a higher-income professional way of looking at the world. I think most people sell the home when they don't want to take that risk. Q: Given the sustained elevated mortgage-rate environment, what is the risk to credit quality or delinquency trends in 2026? Are there segments you're watching closely? FRATANTONI: The last data point we had was August, which was 4.3% for unemployment. We see that getting up to 4.7% by early next year—not awful, but more than what we've seen. The one thing to highlight there is, back in 2023, we were at 3.4%, so it's more the change than the level that's worth paying atten- tion to. We're moving up quickly. People are getting jobs very, very quickly. Now we're at a place where hiring is very, very low. You're beginning to see some more layoffs, and so the leverage in the job market has moved towards the employ- er, and you're seeing wage growth slow. In terms of mortgage impact, one of the tightest correlations we see is between the unemployment rate and the delin- quency rate. What's really changed is with respect to the housing market. Last year or two years ago, if someone lost their job and they decided they needed to move, they could list their home and it would be sold before the ink was dry. That is not the case anymore. Things are lingering on the market, particularly in Sunbelt markets. I think we're going to see what would've been short-term delinquencies leading to a home sale previously; they're going to progress into deeper delinquencies. Foreclosure rates have been extraordinarily low for the past couple of years. They're probably going to go a little bit higher. In the more normal world, whatever that was, the foreclosure process was one source of housing supply. It just hasn't been in recent years, and I think that'll be more of the picture in 2026. We will be in a somewhat weaker job market, delinquencies will go longer, foreclosures will increase, and we'll see some of those distressed properties hit the market. RICK SHARGA Founder & CEO, CJ Patrick Company Q: How would you characterize the housing market heading into 2026: correction, stabilization, or early recovery? SHARGA: I believe that we're in the third year of a five-year "reset" period, as the market slowly adjusts to higher prices and higher mortgage rates. We've never before had a period where home prices rose by over 40%, followed by mortgage interest rates doubling, and that one-two punch decimated affordability, especially for first-time buyers. Existing home sales fell from over six million in 2021 to five million in 2022, four million in 2023 and 2024, and are on pace to finish the year at about the same number this year. Inventory levels are rising, days on market increasing, and home price appreciation slowing down—and reversing course, in some markets—as wages grow. We can probably expect another year of lackluster sales and price growth in 2026, but the market should begin to recover as we move closer to 2027. Q: With affordability still strained and inventory tight, do you see transaction volumes improving next year or remaining near historic lows? SHARGA: I think 2026 sales volume will be modestly better than 2025, but not much more than that. Barring anything extraordinary happening in the economy—either positive or nega- tive—we'll likely have at least one more year where existing home sales will be challenged to go much higher than four million units, and where home price ap- preciation will continue to slow down in most markets, and go negative in some parts of the country. Inventory will con- tinue to increase, though, at least partly due to the pace of sales slowing down, and some older homeowners deciding it's time to downsize. Q: What do the latest foreclosure and delinquency trends suggest about borrower health going into 2026? SHARGA: Mortgage delinquency rates continue to stay below historical averages and are close to the lowest they've ever been. There's a combination of factors at play here: the unemployment rate is still very low (and there's a strong correlation between unemployment rates and mort- gage delinquency rates); borrower credit quality has been excellent; millions of homeowners refinanced into lower inter- est rate loans, and so may be paying less every month today than when they first bought their house; and there's a massive amount of homeowner equity—well over $34 trillion—that distressed homeown- ers can tap into if they need it. Mortgage servicers have also been extraordinarily helpful to borrowers who find themselves in temporary financial distress, which has kept delinquencies from rolling into foreclosure. And overall foreclosure activity, which was up about 17% from a year ago, according to ATTOM's Q3 2025 Foreclosure Report, is still running about 30% below 2019 levels, which weren't all that high in the first place. That said, there are some red flags. Consumer debt is at an all-time high of $18.4 trillion according to the NY Fed, and delinquencies on that debt have risen for nine of the past 10 quarters. Serious delinquency rates (90+ days past due) on credit cards, auto loans, and stu- dent loans are all now higher than they were prior to COVID. Rapidly rising