Debunking the Foreclosure Crisis Misconception
If you’ve been keeping up with the news lately, you’ve probably come across headlines discussing the increase in foreclosures in today’s housing market. This may have left you uncertain, especially considering buying a home. It’s essential to understand the context of these reports to know the truth about what’s happening today.
The Real Increase: Breaking Down the Numbers
According to a recent report from ATTOM, a property data provider, foreclosure filings are up 2% compared to the previous quarter and 8% since one year ago. While media headlines are drawing attention to this increase, reporting on the number could generate worry for fear that prices could crash. While increasing, the data shows a foreclosure crisis is not where the market is headed.
The Current Scenario vs. the Past
In recent years, the number of foreclosures has decreased to record lows. That’s because, in 2020 and 2021, the forbearance program and other relief options for homeowners helped millions of homeowners stay in their homes, allowing them to get back on their feet during a very challenging period. And with home values rising simultaneously, many homeowners who may have found themselves facing foreclosure under other circumstances could leverage their equity and sell their houses rather than face foreclosure. Moving forward, equity will continue to be a factor that can help keep people from going into foreclosure.
Debunking the Crisis Theory
As the government’s moratorium ended, there was an expected rise in foreclosures. But just because foreclosures are up doesn’t mean the housing market is in trouble. Experts like Clare Trapasso, Executive News Editor at Realtor.com, clarify that many of these foreclosures would have occurred during the pandemic but were postponed due to federal, state, and local foreclosure moratoriums designed to keep people in their homes. This isn’t a repeat of the Great Recession, as the ability to afford mortgage payments is not the issue. Instead, many lenders are now catching up with foreclosures that would have happened during the pandemic if moratoriums hadn’t halted the proceedings.
Graph Comparison: Now vs. the Housing Crash
Look at the graph below to further paint the picture of just how different the situation is now compared to the housing crash. It uses data on foreclosure filings for the first half of each year since 2008 to show foreclosure activity has been consistently lower since the crash.
More Than Just Numbers: Qualification and Loan Defaults
While foreclosures are climbing, it’s apparent foreclosure activity now is nothing like it was back then. Today, foreclosures are far below the record-high number reported when the housing market crashed. Additionally, buyers, today are more qualified and less likely to default on their loans, contributing to the stability of the current housing market.
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, which won’t lead to a crash in home prices. Understanding the factors behind the increase and the significant differences between current and past situations will help potential homebuyers make informed decisions without worrying.