I don't foresee a wave of foreclosures crushing our market. Here’s why.
With the housing market strengthening every day and more Americans returning to work, our housing sector is recovering from the pandemic faster than what was expected. However, many people are still asking the question: Will we see a wave of foreclosures given the current crisis?
Thankfully, research shows that the number of foreclosures is expected to be much lower than what the country experienced during the last recession. According to Black Knight, Inc., the number of mortgages in active forbearance has been leveling off over the past month. Of the original 4,208,000 families granted forbearance, only 2,000,588 homeowners got an extension. This shows that people are paying their mortgages again. Either that, or they never tried lengthening their payments in the first place. They may have applied for forbearance out of caution, but they never acted on it.
The housing market is in a better position than many think, and much of this is due to the fact that today’s homeowners have more equity than in years past. According to John Burns Real Estate Consulting, over 42% of all homes are owned free and clear. This means they’re not tied to a mortgage. The other 58% average roughly $177,000 in equity. This figure is keeping many homeowners afloat.
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A perfect storm for a wave of foreclosures is not in the housing market forecast.
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While ATTOM Data Solutions indicates that there’s a potential for foreclosures to increase throughout the county, it’s important to understand why they won’t rock the housing market this time around. As of right now, the active quarterly foreclosure number stands at 74,860. That’s over 7.5 times lower than the number of foreclosures we saw in 2009. Even if the number of quarterly foreclosures doubles, they’ll only reach a normalized range, historically speaking.
Equity is growing, jobs are returning, and the economy is slowly recovering. A perfect storm for a wave of foreclosures is not in the housing market forecast. While our hearts are with anyone who ends up in a foreclosure situation as a result of this crisis, we do know the homeowners have more options than they did 10 years ago. For some, this may mean selling their house and downsizing without equity, which is a far better outcome than foreclosure.
As always, if you have questions about this or any real estate topic or are thinking of buying or selling a home soon, don’t hesitate to reach out to me. I’m happy to help.
