It Isn’t the Dramatic Increase Headlines Would Have You Believe
In recent years, the number of foreclosures has been down 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 at the same time, many homeowners who may have found themselves facing foreclosure under other circumstances were able to 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.
“Many of these foreclosures would have occurred during the pandemic, but were put off due to federal, state, and local foreclosure moratoriums designed to keep people in their homes . . . Real estate experts have stressed that this isn’t a repeat of the Great Recession. It’s not that scores of homeowners suddenly can’t afford their mortgage payments. Rather, many lenders are now catching up. The foreclosures would have happened during the pandemic if moratoriums hadn’t halted the proceedings.”
In a recent article, Bankrate also explains:
“In the years after the housing crash, millions of foreclosures flooded the housing market, depressing prices. That’s not the case now. Most homeowners have a comfortable equity cushion in their homes. Lenders weren’t filing default notices during the height of the pandemic, pushing foreclosures to record lows in 2020. And while there has been a slight uptick in foreclosures since then, it’s nothing like it was.”
Basically, there’s not a sudden flood of foreclosures coming. Instead, some of the increase is due to the delayed activity explained above while more is from economic conditions.
To further paint the picture of just how different the situation is now compared to the housing crash, take a look at the graph below. 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.