Why Today’s Foreclosure Numbers Won’t Trigger a Crash — NIC, THE REALTOR

With prices going up lately, it's normal to be concerned about how these rising costs will affect the housing market. Many folks are worried that higher prices and tighter budgets may lead to more homeowners struggling to meet their mortgage payments, which could result in a rise in foreclosures.

But before you start stressing about a potential housing market crash, let’s take a look at the current situation. The good news is that the latest foreclosure data indicates there isn’t a wave coming our way.

How Today’s Market Is Different from 2008

Let’s take a moment to look at the bigger picture and ease those concerns. According to research from ATTOM, a property data provider, the number of homeowners entering the foreclosure process today is far less than what we experienced after 2008. Back then, there was a significant rise in foreclosures. In contrast, current numbers are much lower and have even decreased in the latest report. The situation now is quite different from the housing market crash we faced years ago (see graph below).

If you’re curious about the recent slight rise in foreclosure filings since 2020 and 2021, here's the scoop. During those years, there was a moratorium in place to assist millions of homeowners facing tough times, which is why the numbers were so low back then. When you check the numbers from further back, you'll see that overall foreclosure filings have actually decreased significantly.

If you're curious about why there are fewer foreclosures now, even with rising living costs, here's the explanation. A key factor is that homeowners today have significantly more equity in their homes compared to 2008. An article from Bankrate highlights this trend.

“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.”
— Bankrate

This equity serves as a safety net, helping many homeowners steer clear of foreclosure when they're facing financial struggles. Even if someone finds it tough to keep up with monthly payments, they might still have the option to sell their home and sidestep foreclosure entirely. This situation is a significant improvement compared to the crash, when homeowners owed more on their mortgages than their homes' actual value.

What’s Ahead for the Housing Market

It’s true that the rising cost of living is a challenge for many people today. However, this doesn’t necessarily mean we’ll see a big increase in foreclosures.

The equity cushion that homeowners currently have is playing a significant role in keeping foreclosure filings down. Today, homeowners have various options available to help them steer clear of foreclosure.

Bottom Line

Everyday expenses like gas and food have definitely increased, but that doesn’t mean we’re headed for another foreclosure crisis in the housing market. The data indicates that a wave of foreclosures is unlikely. Today’s homeowners are in a much better financial position compared to those during the 2008 crash, largely due to the considerable equity they’ve built.



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