Foreclosures in Today’s Housing Market, Where Are They?

By
Real Estate Broker/Owner with Charles Stallions Real Estate Services

 

What You Actually Need To Know About the Number of Foreclosures in Today’s Housing Market

While you may have seen recent stories about the volume of foreclosures today, context is important. During the pandemic, many homeowners were able to pause their mortgage payments using the forbearance program. The goal was to help homeowners financially during the uncertainty created by the health crisis.

When the forbearance program began, many experts were concerned it would result in a wave of foreclosures coming to the market, as there was after the housing crash in 2008. Here’s a look at why the number of foreclosures we’re seeing today is nothing like the last time.

1. There Are Fewer Homeowners in Trouble

Today’s data shows that most homeowners are exiting their forbearance plan either fully caught up on payments or with a plan from the bank that restructured their loan in a way that allowed them to start making payments again. The graph below depicts those findings from the Mortgage Bankers Association (MBA):

What You Actually Need To Know About the Number of Foreclosures in Today’s Housing Market | Keeping Current Matters

The same MBA report mentioned above estimates there are approximately 525,000 homeowners who remain in forbearance today. Thankfully, those people still have the chance to work out a suitable repayment plan with the servicing company that represents their lender.

2. Most Homeowners Have Enough Equity To Sell Their Homes

For those who are exiting the forbearance program without a plan in place, many will have enough equity to sell their homes instead of facing foreclosures. Due to rapidly rising home prices over the last two years, the average homeowner has gained record amounts of equity in their home.

Marina Walsh, CMB, Vice President of Industry Analysis at MBA, says:

“Given the nation’s limited housing inventory and the variety of home retention and foreclosure alternatives on the table across various loan types, . . . Borrowers have more choices today to either stay in their homes or sell without resorting to a foreclosure.”

3. There Have Been Fewer Foreclosures over the Last Two Years

One of the seldom-reported benefits of the forbearance program was it gave homeowners facing difficulties an extra two years to get their finances in order and work out a plan with their lender. That helped prevent the foreclosures that normally would have come to the market had the new forbearance program not been available.

Even as people leave the forbearance program, there are still fewer foreclosures happening today than before the pandemic. That means, while there are more foreclosures now compared to last year (when foreclosures were paused), the number is still well below what the housing market has seen in a more typical year, like 2017-2019 (see graph below):

What You Actually Need To Know About the Number of Foreclosures in Today’s Housing Market | Keeping Current Matters

4. The Current Market Can Easily Absorb New Listings

When the foreclosures in 2008 hit the market, they added to the oversupply of houses that were already for sale. It’s exactly the opposite today. The latest Existing Home Sales Report from the National Association of Realtors (NAR) reveals:

“Total housing inventory at the end of March totaled 950,000 units, up 11.8% from February and down 9.5% from one year ago (1.05 million). Unsold inventory sits at a 2.0-month supply at the present sales pace, up from 1.7 months in February and down from 2.1 months in March 2021.”

A balanced market would have approximately a six-month supply of inventory. At 2.0 months, today’s housing market is severely understocked. Even if one million homes enter the market, there still won’t be enough inventory to meet the current demand.

If you see headlines about the increasing number of foreclosures today, remember context is important. While it’s true the number of foreclosures is higher now than it was last year, foreclosures are still well below pre-pandemic years.

If you have questions, reach out to a real estate professional who can help explain the latest market conditions and what they mean for you.

Bottom Line 

 

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Comments (7)

Bob "RealMan" Timm
Ward County Notary Services - Minot, ND
Owner of Ward Co Notary Services retired RE Broker

This is very interesting information to me Charles Stallions . I of course was/am interested in the Modifications as it has brought me a ton of notary work. I was also thinking that this situation is not as bad as the crash because the crash itself weeded out a lot of people who never should have been homeowners and because of the crash they themselves know home ownership just was NOT for them.

May 24, 2022 01:07 PM
Charles Stallions

Interesting Bob, we have found that some of the same ole stuff has come back to the market as some lenders seem to lend to them anywa. But we seem to be safe.

May 25, 2022 01:43 PM
Bill Salvatore - East Valley
Arizona Elite Properties - Chandler, AZ
Realtor - 602-999-0952 / em: golfArizona@cox.net

Thank you for sharing the information. Buyers and sellers in your area will benefit from your expertise. Wishing you continued success.  Have a wonderful day and sell a house.  bill

May 24, 2022 01:43 PM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Charles Stallions we still have an occasional foreclosure around here, but they are FAR less than they were just a few years ago.

May 24, 2022 03:23 PM
Charles Stallions

True that and hopefully it will remain that way

May 25, 2022 01:44 PM
Dave Halpern
Dave Halpern Real Estate Agent, Inc., Louisville, KY (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert

We will start to see non-foreclosure distressed sales of sellers who can't handle their payments but have enough equity to sell.

May 24, 2022 07:08 PM
Paddy Deighan MBA JD PhD
federalfinanciallawgroup.com - Vail, CO
Paddy Deighan J.D. Ph.D

I have been surprised by the relative lack of foreclosures....a lot of "experts" have predicted mass foreclosures

May 24, 2022 07:59 PM
Mark Pedroza
HomeSmart Realty - Roseville, CA

Here in the San Francisco Bay Area the market is still crazy. Yes there occasional N.O.D's but nothing to get excited about... 

May 25, 2022 01:45 AM
Ed Silva
Mapleridge Realty, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

The escalation in prices and the pause in the courts has given people underwater and opportunity to get their financial house in order and escape the foreclosure

May 25, 2022 03:11 AM
Charles Stallions

Let's hope so Ed

May 25, 2022 01:45 PM