Foreclosure Activity Remains Lower than the Norm

Have you seen any headlines about the rise in foreclosures in today's housing market? If this is the case, you may be concerned about what comes next. However, keep in mind that these clickbait titles do not always tell the whole story.

The truth is that if you compare the current numbers to what happens in the market on a regular basis, you will notice that there is no reason to be concerned.

Putting the Headlines into Perspective

The increase the media is calling attention to is misleading. That’s because they’re only comparing the most recent numbers to a time when foreclosures were at historic lows. And that’s 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 and recover from a difficult period.

When the moratorium ended, foreclosures were expected to rise. But just because foreclosures are increasing does not imply that the housing market is in trouble.

Historical Data Shows There Isn’t a Wave of Foreclosures

Instead of comparing today's numbers to the previous few abnormal years, it is better to look at long-term trends, specifically the housing crash, which many people fear will 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, it’s clear this is nothing like it was back then.

In fact, we’re not even back at the levels we’d 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. . .”

This is due in large part to today's buyers being more qualified and less likely to default on their loans. Delinquency rates remain 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 it’s headed.

Bottom Line

Even though foreclosures are expected to rise, they are still far from the crisis levels seen when the housing bubble burst. If you have any questions about what you have heard or read about the housing market, please contact us.

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