Have you come across headlines about the apparent surge in foreclosures in today’s housing market? If so, it’s understandable if you feel a bit concerned about what the future holds. However, it’s crucial to remember that these attention-grabbing titles often don’t provide the complete picture.
In reality, when you compare the current foreclosure numbers to what typically occurs in the market, you’ll realize there’s no need for alarm.
Putting the Headlines into Perspective
The increase in foreclosure rates that the media is highlighting can be misleading. This is because they are comparing recent figures to a time when foreclosures were at historically low levels, creating an exaggerated sense of urgency.
In 2020 and 2021, the moratorium and forbearance programs played a significant role in helping millions of homeowners remain in their homes, allowing them to regain their financial footing during a challenging period.
When the moratorium eventually ended, a predictable increase in foreclosures followed. However, it’s essential to understand that a rise in foreclosures does not automatically translate to a housing market in trouble.
Historical Data Shows There Isn’t a Wave of Foreclosures
Rather than comparing today’s numbers with the last couple of unusual years, it’s more meaningful to compare them to long-term trends – particularly the housing crash of 2008, which is what many fear may happen again.
Take a look at the graph below, which uses foreclosure data from ATTOM, a property data provider. It illustrates that foreclosure activity has consistently remained lower (depicted in orange) since the crash in 2008 (depicted in red):
As you can see, while foreclosure filings have increased in the most recent report, the situation today is vastly different from what it was during the housing crisis.
In fact, we haven’t even reached the levels seen in more typical years, like 2019. According to Rick Sharga, Founder and CEO of the CJ Patrick Company, “Foreclosure activity is still only at about 60% of pre-pandemic levels.”
This is largely because today’s homebuyers are more financially stable and less likely to default on their loans. Delinquency rates remain low, and most homeowners have enough equity to prevent foreclosure. Molly Boesel, Principal Economist at CoreLogic, notes, “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.”
In reality, while foreclosures are on the rise, the data indicates that we are far from experiencing a foreclosure crisis similar to what occurred during the housing bubble burst.
Bottom Line
Despite the expected increase in foreclosures in the housing market, we are nowhere near the crisis levels seen in the past. If you have questions or concerns about what you’ve heard or read regarding the housing market, don’t hesitate to reach out and let’s connect to discuss it further.