Will Foreclosures Be Flooding the Market Soon?

With the rapid shift that’s happened in the housing market this year, many people are worried that we’re headed for a repeat of the crash we saw in 2008. There are, however, many big differences between what’s happening today and what happened during the bubble in the early 2000s. The main reason is that the number of foreclosed properties in the current market is far lower than was the case in 2008. Why is this?

Not as Many Homeowners Are in Trouble This Time

During the housing crash in 2008over nine million households lost their homes due to a foreclosure, short sale, or because they gave it back to the bank. In large part this was because of more relaxed lending standards where people could take out mortgages they ultimately couldn’t afford. Those lending practices led to a wave of distressed properties which made their way into the market and caused home values to plummet. In addition, mortgage products such as "no income verification" or "balloon" payments ran rampant and the result was millions of people who couldn't make their mortgage payments.

Today's revised, tightened lending standards have resulted in more qualified buyers and the end of risky loan products. As a result, there are fewer homeowners who are behind on their mortgages. Mortgage deliquency rates are at the lowest they've been in over 40 years.

There Have Been Fewer Foreclosures Over the Last Two Years

During the pandemic, many homeowners were able to pause their mortgage payments using theforebearance program. This allowed homeowners facing payment difficulties extra time to work out a plan with their lender to make or catch up on late payments. So while there are more foreclosures now compared to last year (when foreclosures were paused), the number is still well below what the housing market has seen in a more typical year, like 2017-2019. The number we’re seeing now is still far below the number we saw during the market crash While foreclosures are up year-over-year, historical context is essential to understanding the full picture.

Most Homeowners Have More Than Enough Equity To Sell Their Homes

Many homeowners today have enough equity tosell their homes instead of facing foreclosure. In the collapse in 2008, many homeowners were "upside down" on their mortgages, as their homes were worth less than they had paid for them. Today, due to rapidly rising home prices over the last two years, the average homeowner has gained record amounts of equity in their home. And if they’ve been in their homes longer than two years, they may have even more equity than they realize. This equity provides a cushion for homeowners to withstand potential price declines and avoid foreclosure, since their homes will likely sell for well over the mortgage balance.

If you're having trouble making your mortgage payments, let us know. We can provide you with a market analysis of your home, so you'll know your home's value in the current market. With that information you can decide if it makes sense to put your home on the market, take advantage of the equity, and rid yourself of the stress of a looming foreclosure. We are also happy to put you in touch with lenders who may be able to help you refinance into a manageable mortgage payment.  We're here to help!