If you’ve seen Today’s Foreclosure Headlines about distressed sales surging in the housing market, you’re certainly not alone. The stories in the media can be pretty confusing right now. They may even make you think twice about buying a home for fear that prices could crash. The reality is, the data shows a foreclosure crisis is not where the market is headed. You need to understand what that really means if you want to know the truth about what’s happening today. Here’s a deeper look.
According to the Year-End 2022 U.S. Foreclosure Market Report from ATTOM, foreclosure filings are up 115% from 2021, but down 34% from 2019. As Today’s Foreclosure Headlines grab onto this 115% increase, it’s more important than ever to put that percentage into context.
The number of Today’s Foreclosure Headlines filings more than doubled last year. We need to remember why that happened and how it compares to more normal, pre-pandemic years in the market. Thanks to the forbearance program and other relief options for homeowners, foreclosure filings were down to record-low levels in 2020 and 2021. Any increase last year is — no surprise — a jump up. Rick Sharga, Executive VP of Market Intelligence at ATTOM, notes:
“Eighteen months after the end of the government’s foreclosure moratorium, and with less than five percent of the 8.4 million borrowers who entered the CARES Act forbearance program remaining, foreclosure activity remains significantly lower than it was prior to the COVID-19 pandemic. It seems clear that government and mortgage industry efforts during the pandemic, coupled with a strong economy, have helped prevent millions of unnecessary foreclosures.”
Today’s Foreclosure Headlines – Leveraging Equity
Clearly, these options meant millions of homeowners could stay in their homes, allowing them to get back on their feet during a very challenging period. With home values rising at the same time, many homeowners who may have found themselves facing Today’s Foreclosure Headlines under other circumstances were able to leverage their equity and sell their houses rather than face foreclosure, and that trend continues today.
And remember, as the graph below shows, foreclosures today are far below the record-high 2.9 million that was reported in 2010 when the housing market crashed.
Keeping perspective in mind is key regarding Today’s Foreclosure Headlines. As Bill McBride, Founder and Author of Calculated Risk, noted just last week:
“The bottom line is there will be an increase in foreclosures over the next year (from record low levels), but there will not be a huge wave of distressed sales as happened following the housing bubble. The distressed sales during the housing bust led to cascading price declines, and that will not happen this time.”
Bottom Line – Today’s Foreclosure Headlines
In conclusion, putting the data into context is more important than ever. The housing market is experiencing an expected rise in foreclosures. Moreover, it’s nowhere near the crisis levels seen when the housing bubble burst. The bottom line is they won’t lead to a crash in home prices.