If you’ve been following the recent news, you’ve probably noticed headlines discussing the rise in foreclosures in today’s housing market. This might have caused some concern, especially if you’re considering buying a home. However, it’s crucial to understand the context of these reports to get a clear picture of the current situation.
According to a recent report from ATTOM, a property data provider, foreclosure filings have increased by 2% compared to the previous quarter and 8% compared to the same time last year. While the media’s attention to this increase might spark worries about a potential housing price crash, it’s essential to recognize that the data indicates the market is not heading toward a foreclosure crisis.
To gain a better perspective, let’s examine this information in the context of previous years.
It Isn’t the Dramatic Increase Headlines Would Have You Believe
In recent years, foreclosure rates have reached record lows due to various relief measures introduced for homeowners, such as the forbearance program, during the challenging period of 2020 and 2021. These initiatives allowed millions of homeowners to remain in their homes, giving them the opportunity to recover from financial difficulties. Additionally, the surge in home values enabled many homeowners to tap into their equity and sell their properties instead of facing foreclosure, which contributed to the decline in foreclosure numbers.
While the expiration of the government’s moratorium on foreclosures led to an anticipated increase in such cases, it’s important to note that this rise in foreclosures does not indicate a housing market crisis. The availability of equity for homeowners will continue to play a significant role in preventing foreclosure situations in the future.
“Many of these foreclosures would have occurred during the pandemic, but were put off due to federal, state, and local foreclosure moratoriums designed to keep people in their homes . . . Real estate experts have stressed that this isn’t a repeat of the Great Recession. It’s not that scores of homeowners suddenly can’t afford their mortgage payments. Rather, many lenders are now catching up. The foreclosures would have happened during the pandemic if moratoriums hadn’t halted the proceedings.”
In a recent article, Bankrate also 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. Lenders weren’t filing default notices during the height of the pandemic, pushing foreclosures to record lows in 2020. And while there has been a slight uptick in foreclosures since then, it’s nothing like it was.”
The current housing market situation does not indicate a sudden flood of foreclosures. Rather, the increase in foreclosure numbers can be attributed partially to delayed activity, as explained earlier, and partly to prevailing economic conditions.
To better understand the contrast between the present situation and the housing crash, let’s consider the graph below. The graph presents data on foreclosure filings for the first half of each year since 2008, illustrating how foreclosure activity has consistently remained lower since the housing crash. This graph reinforces the significant differences between the two periods.
Overall, while there has been a rise in foreclosures, the current scenario is far from resembling the housing market crash, thanks to various relief measures and economic factors.
While foreclosures are climbing, it’s clear foreclosure activity now is nothing like it was back then. Today, foreclosures are far below the record-high number that was reported when the housing market crashed.
In addition to all the factors mentioned above, that’s also largely because buyers today are more qualified and less likely to default on their loans.
Right now, putting the data into context is more important than ever. While the housing market is experiencing an expected rise in foreclosures, it’s nowhere near the crisis levels seen when the housing bubble burst and that won’t lead to a crash in home prices.