Why Today's Foreclosure Numbers Are Nothing Like 2008
You've probably read stories regarding the rising number of foreclosures in today's property market. That may raise a few questions for you, especially if you're considering purchasing a home. Understanding what they truly imply is crucial if you want to know the truth about what is going on right now.
According to ATTOM, a property data supplier, foreclosure filings are up 6% from the previous quarter and 22% from a year ago. As media headlines draw attention to this surge, reporting on the number alone may cause concern and possibly make you reconsider purchasing a home for fear of a price drop. While foreclosures are on the rise, the data demonstrates that a foreclosure crisis is not on the horizon.
Let's take a look at the most recent data in context to see how it compares to past years.
It's Not the Dramatic Increase That Headlines Lead You To Believe
The number of foreclosures has been at an all-time low in recent years. This is because, in 2020 and 2021, the forbearance program and other homeowner relief choices enabled millions of homeowners stay in their homes, helping them to get back on their feet during a difficult time. And, with property values soaring at the same time, many homeowners who might otherwise have faced foreclosure were able to leverage their equity and sell their homes rather than face foreclosure. Equity will continue to be a factor that can help keep folks out of foreclosure in the future.
As the government's moratorium expired, foreclosures were projected to climb. However, just because foreclosures are on the rise does not imply that the housing market is in jeopardy. According to Clare Trapasso, Executive News Editor at Realtor.com:
"There's no need to panic, at least not right now." Foreclosure filings began to rise. ..after the federal foreclosure moratorium ended. To prevent a flood of homeowners losing their properties during the early days of COVID-19, when millions of Americans lost their employment, the moratorium was created. As a result, some of these proceedings would have occurred during the epidemic but were postponed because to the moratorium. This is a little behind schedule."
Basically, there will not be a rush of foreclosures. Instead, some of the rise is attributable to the above-mentioned delayed activity, while the majority is due to economic conditions. As ATTOM CEO Rob Barber explains:
"This regrettable trend can be attributed to a number of factors, including rising unemployment rates, foreclosure filings moving through the pipeline after two years of government intervention, and other ongoing economic challenges." However, the fact that many homeowners still have large home equity may assist to keep higher levels of foreclosure activity at bay."
Take a look at the graph below to see just how different the situation is now compared to the housing meltdown. It demonstrates that foreclosure activity has been decreased after the crash by examining properties having a foreclosure file dating back to 2005.
While foreclosures are on the rise, it is evident that current foreclosure activity is nothing like it was during the housing crisis. In addition to all of the causes described above, that’s also largely because purchasers today are more qualified and less likely to default on their loans.
Foreclosures are now considerably below the all-time high reported when the housing market fell.
Putting data into perspective is more crucial than ever right now. While foreclosures are projected to climb in the housing market, they are nothing near the crisis levels observed when the housing bubble burst, and this will not result in a drop in home prices.
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