Why Today’s Foreclosure Numbers Don’t Look Like 2008
You’ve probably seen the headlines that foreclosures are on the rise in today’s real estate market. Some questions may arise, especially if you are thinking of buying a home. If we want to know the truth about what is happening today, it is important to understand what it really means.
Foreclosure claims are up 6% quarter-on-quarter and 22% year-over-year, according to a recent report from real estate data provider ATTOM. With media headlines highlighting this surge, just reporting this number can actually cause anxiety and even make you reconsider buying a home for fear of falling prices. In fact, the data, although increasing, show that foreclosure crises are not the market’s target.
Let’s put the latest information in context and compare it with the previous year.
It Isn’t the Dramatic Increase Headlines Would Have You Believe
In recent years, foreclosures have fallen to record lows. Because in 2020 and 2021, intolerance programs and other homeowner relief measures helped millions of homeowners stay home and bounce back in very difficult times. And as property values rose at the same time, many homeowners who could face foreclosure were able to leverage their equity to sell their homes without facing foreclosure. Justice will continue to be a factor in saving people from foreclosure.
Foreclosures were expected to increase once the government grace period ended. But just because foreclosures are on the rise doesn’t mean the real estate market is in trouble. Realtor.com Executive Her News Editor Clare Trapasso said:
“There’s no reason to panic, at least not yet. Foreclosure filings began ticking up . . . after the federal foreclosure moratorium ended. The moratorium was enacted in the early days of COVID-19, when millions of Americans lost their jobs, to prevent a tsunami of homeowners losing their properties. So some of these proceedings would have taken place during the pandemic but got delayed due to the moratorium. This is a bit of a catch-up.”
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. As Rob Barber, CEO of ATTOM, explains:
“This unfortunate trend can be attributed to a variety of factors, such as rising unemployment rates, foreclosure filings making their way through the pipeline after two years of government intervention, and other ongoing economic challenges. However, with many homeowners still having significant home equity, that may help in keeping increased levels of foreclosure activity at bay.”
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 shows foreclosure activity has been lower since the crash by looking at properties with a foreclosure filing going all the way back to 2005.
While foreclosures are climbing, it’s clear foreclosure activity now is nothing like it was during the housing crisis. In addition to all of the factors mentioned above, that’s also largely because buyers today are more qualified and less likely to default on their loans.
Today, foreclosures are far below the record-high number that was reported when the housing market crashed.
