Have you seen headlines talking about the increase in foreclosures in todays housing market? If so, they may leave you feeling a bit uneasy about whats ahead. But remember, these clickbait titles dont always give you the full story.
The truth is, if you compare the current numbers with what usually happens in the market, youll see theres no need to worry.
Putting the Headlines into Perspective
The increase the media is calling attention to is misleading. Thats because theyre only comparing the most recent numbers to a time where foreclosures were at historic lows. And thats 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 doesnt mean the housing market is in trouble.
Historical Data Shows There Isnt a Wave of Foreclosures
Instead of comparing todays numbers with the last few abnormal years, its better to compare to long-term trends specifically to the housing crash since thats 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, its clear this is nothing like it was back then.
In fact, were not even back at the levels wed 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. . .
Thats 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 its headed.
Bottom Line
Even though the housing market is experiencing an expected rise in foreclosures, its nowhere near the crisis levels seen when the housing bubble burst. If you have questions about what youre hearing or reading about the housing market, connect with a real estate agent.
