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Foreclosures

Foreclosure Activity Is Still Lower than the Norm

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Have you seen headlines talking about the increase in foreclosures in today’s housing market? If so, they may leave you feeling a bit uneasy about what’s ahead. But remember, these clickbait titles don’t always give you the full story.

The truth is, if you compare the current numbers with what usually happens in the market, you’ll see there’s no need to worry.

Putting the Headlines into Perspective

The increase the media is calling attention to is misleading. That’s because they’re only comparing the most recent numbers to a time where foreclosures were at historic lows. And that’s making it sound like a bigger deal than it is.

In 2020 and 2021, the moratorium and forbearance program helped millions of homeowners stay in their homes, allowing them to get back on their feet during a very challenging period.

When the moratorium came to an end, there was an expected rise in foreclosures. But just because foreclosures are up doesn’t mean the housing market is in trouble.

Historical Data Shows There Isn’t a Wave of Foreclosures

Instead of comparing today’s numbers with the last few abnormal years, it’s better to compare to long-term trends – specifically to the housing crash – since that’s what people worry may happen again.

Take a look at the graph below. It uses foreclosure data from ATTOM, a property data provider, to show foreclosure activity has been consistently lower (shown in orange) since the crash in 2008 (shown in red):

So, while foreclosure filings are up in the latest report, it’s clear this is nothing like it was back then.

In fact, we’re not even back at the levels we’d see in more normal years, like 2019. As Rick Sharga, Founder and CEO of the CJ Patrick Company, explains:

Foreclosure activity is still only at about 60% of pre-pandemic levels. . .”

That’s largely because buyers today are more qualified and less likely to default on their loans. Delinquency rates are still low and most homeowners have enough equity to keep them from going into foreclosure. As Molly Boesel, Principal Economist at CoreLogic, says:

“U.S. mortgage delinquency rates remained healthy in October, with the overall delinquency rate unchanged from a year earlier and the serious delinquency rate remaining at a historic low… borrowers in later stages of delinquencies are finding alternatives to defaulting on their home loans.”

The reality is, while increasing, the data shows a foreclosure crisis is not where the market is today, or where it’s headed.

Bottom Line

Even though the housing market is experiencing an expected rise in foreclosures, it’s nowhere near the crisis levels seen when the housing bubble burst. If you have questions about what you’re hearing or reading about the housing market, connect with a real estate agent.

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Economy

Why Today’s Foreclosure Numbers Won’t Trigger a Crash

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With everything feeling more expensive these days, it’s natural to worry about how rising costs might impact the housing market. Many people are concerned that high prices and tighter budgets could cause more homeowners to fall behind on their mortgage payments, leading to a wave of foreclosures.

But before you start worrying about a housing market crash, here’s a look at what’s really happening. And the good news is: the latest foreclosure data shows there’s no wave on the horizon.

How Today’s Market Is Different from 2008

Let’s ease those fears by looking at the bigger picture. The graph below uses research from ATTOM, a property data provider, to show that the number of homeowners starting the foreclosure process is nowhere near what we saw coming out of 2008. Back then, there was a big spike in how many foreclosures were happening. Today, the number is much lower – it’s even dropped some in the latest report. There’s a big difference between what’s happening now, and what happened when the housing market crashed (see graph below):

a graph of a fallJust in case you’re wondering why the number of foreclosure filings has ticked up slightly since 2020 and 2021, here’s what you need to know. During those years, there was a moratorium (shown in white) designed to help millions of homeowners avoid foreclosure in challenging times. That’s why the numbers for just a few years ago were so incredibly low. If you look further back, it’s clear overall foreclosure filings are down significantly.

And if you’re wondering: how are there fewer foreclosures today, even when the cost of living has gotten so pricey? Here’s your answer. One of the main reasons is that homeowners today have a lot more equity built up in their homes than they did back in 2008. As an article from Bankrate explains:

“In the years after the housing crash, millions of foreclosures flooded the housing market, depressing prices. That’s not the case now. Most homeowners have a comfortable equity cushion in their homes.” 

This equity acts like a safety net and is allowing many homeowners to avoid going into foreclosure if they’re facing financial hardships. Even if someone is struggling to make their monthly payments, they may be able to sell their home and avoid foreclosure altogether. This is a far cry from the conditions during the crash when homeowners owed more on their mortgages than their homes were worth.

What’s Ahead for the Housing Market

It’s true that today’s higher cost of living across the board is a challenge for many people right now. But this doesn’t mean we’re heading for a surge in foreclosures.

The equity cushion that people have is helping to keep foreclosure filings low. Today’s homeowners have more options to avoid going into foreclosure.

Bottom Line

Yes, everyday costs for gas and food have gotten more expensive—but that doesn’t mean the housing market is on the brink of another foreclosure crisis. Data shows the market is far from a foreclosure wave. Homeowners today are in a much stronger financial position than they were during the 2008 crash, thanks to significant equity. 

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Foreclosures

3 Reasons Why We’re Not Headed for a Housing Crash

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No Caption Received

Some Highlights

  • Back in 2008, there was an oversupply of homes for sale. Today, there’s an undersupply. The three main sources of inventory show this isn’t like the last time.
  • Existing homes, new homes, and foreclosures are all way below the levels we saw during the housing crash.
  • Inventory data shows there just aren’t enough homes available to have a repeat of what happened back in 2008. 

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Forecasts

Why a Foreclosure Wave Isn’t on the Horizon

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Even though data shows inflation is cooling, a lot of people are still feeling the pinch on their wallets. And those high costs on everything from gas to groceries are fueling unnecessary concerns that more people are going to have trouble making their mortgage payments. But, does that mean there’s a big wave of foreclosures coming?

Here’s a look at why the data and the experts say that’s not going to happen.

There Aren’t Many Homeowners Who Are Seriously Behind on Their Mortgages

One of the main reasons there were so many foreclosures during the last housing crash was because relaxed lending standards made it easy for people to take out mortgages, even when they couldn’t show they’d be able to pay them back. At that time, lenders weren’t being as strict when looking at applicant credit scores, income levels, employment status, and debt-to-income ratio.

But since then, lending standards have gotten a whole lot tighter. Lenders became much more diligent when assessing applicants for home loans. And that means we’re seeing more qualified buyers who have less of a risk of defaulting on their loans.

That’s why data from Freddie Mac and Fannie Mae shows the number of homeowners who are seriously behind on their mortgage payments (known in the industry as delinquencies) has been declining for quite some time. Take a look at the graph below:  No Caption Received

What this means is that, not only are borrowers more qualified, but they’re also finding ways to navigate through their challenges, exploring their repayment options, or maybe even using the record amount of equity they have to sell and avoid foreclosure entirely.

The Answer Is: There’s No Sign of a Wave Coming

Before there can be a significant rise in foreclosures, the number of people who can’t make their mortgage payments would need to rise significantly. But, since so many buyers are making their payments today and homeowners have so much equity built up, a wave of foreclosures isn’t likely.

Take it from Bill McBride of Calculated Risk – an expert on the housing market who, after closely following the data and market leading up to the crash, was able to see the foreclosure crisis coming in 2008. McBride says:

“We will NOT see a surge in foreclosures that would significantly impact house prices (as happened following the housing bubble) for two key reasons: 1) mortgage lending has been solid, and 2) most homeowners have substantial equity in their homes.”

Bottom Line

If you’re worried about a potential foreclosure crisis, know there’s nothing in the data to suggest that’ll happen. Buyers are more qualified now, and that’s one reason why they’re not falling seriously behind on their mortgage payments. 

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The information contained, and the opinions expressed, in these article are not intended to be construed as investment advice. Let's Talk Real Estate and Keeping Current Matters, Inc. do not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Let's Talk Real Estate and Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.