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![Don’t Expect a Wave of Foreclosures [INFOGRAPHIC] Simplifying The Market](https://daytonabeachpropertysearch.com/wp-content/uploads/2023/08/Dont-Expect-A-Wave-Of-Foreclosures-KCM-Share.png)
The rising cost of just about everything from groceries to gas right now leads to speculation that more people won’t be able to afford their mortgage payments. And that’s creating concern that many foreclosures are on the horizon. While it’s true that foreclosure filings have gone up a bit compared to last year, experts say a flood of foreclosures isn’t coming.
Take it from Bill McBride of Calculated Risk. McBride is an expert on the housing market, and after closely following the data and market environment leading up to the crash, he was able to see the foreclosures coming in 2008. With the same careful eye and analysis, he has a different take on what’s ahead in the current market:
“There will not be a foreclosure crisis this time.”
Let’s look at why another flood is so unlikely.
One of the main reasons there were so many foreclosures during the last housing crash was that relaxed lending standards made it easy for people to take out mortgages, even if they couldn’t show that they’d be able to pay them back. At that time, lenders weren’t being very strict when assessing applicant credit scores, income levels, employment status, and debt-to-income ratio.
But now, lending standards have tightened, leading to more qualified buyers who can afford to make their mortgage payments. And data from Freddie Mac and Fannie Mae shows the number of homeowners who are seriously behind on their mortgage payments is declining (see graph below):
Molly Boese, Principal Economist at CoreLogic, explains just how few homeowners are struggling to make their mortgage payments:
“May’s overall mortgage delinquency rate matched the all-time low, and serious delinquencies followed suit. Furthermore, the rate of mortgages that were six months or more past due, a measure that ballooned in 2021, has receded to a level last observed in March 2020.”
Before there can be a significant rise in foreclosures, the number of people who can’t make their mortgage payments would need to rise. Since so many buyers are making their payments today, a wave of foreclosures isn’t likely.
If you’re worried about a potential flood of foreclosures, know there’s nothing in the data today to suggest that’ll happen. In fact, qualified buyers are making their mortgage payments at a very high rate.
If you’re a homeowner, odds are your equity has grown significantly over the last few years. Equity builds over time as home values grow and as you pay down your home loan. And, since home prices skyrocketed during the ‘unicorn’ years, you’ve likely gained more than you think.
According to the latest Equity Insights Report from CoreLogic, the average homeowner has more than $274,000 in equity right now. That much equity can help you achieve certain goals. In a recent article, Bankrate elaborates:
“While the pandemic created serious challenges, the silver lining for anyone who owned a home was the sizable equity gain. Understanding how home equity works, and how to leverage it, is important for any homeowner.”
Here are a few examples of how you can put your home equity to work for you.
If your current space no longer meets your needs, it might be time to think about moving to a bigger home. And if you’ve got too much space, downsizing to a smaller home could be just right. Either way, you can put your equity toward a down payment on a home that fits your changing lifestyle. A real estate agent can help you figure out how much equity you’ve got and how to use it when buying your next home.
Renovations are a great option if you want to change your living space, but you aren’t yet ready to make a move. Home improvement projects give you the freedom to tailor your home to match your needs and personal style. But it’s important to consider the long-term benefits certain upgrades can bring to your home’s value. Lean on a real estate professional for the best advice on which improvement projects to prioritize in order to get the greatest return on your investment when you sell later on.
Home equity can also serve as a catalyst for realizing your life-long dreams. That could mean investing in a new business venture, retirement, or funding an education. While you shouldn’t use your equity for unnecessary spending, using it responsibly for something meaningful and impactful can really make a difference in your life.
Today the number of foreclosure filings remains below the norm, so there’s no need to fear a wave of foreclosed homes flooding the market. But unfortunately, there are still some homeowners who experience the foreclosure process each year. If you’re facing financial difficulties, having a clear understanding of your options and how your equity can help is crucial. Equity can act as a financial cushion that can be used in times of unexpected challenges or unforeseen circumstances that may disrupt your ability to make mortgage payments on time.
In an article, Freddie Mac explains it this way:
“If exiting your home is the best option for you, selling with equity may be a good option. When selling with equity, you are using the proceeds from selling your home at a higher price than the amount you owe on your mortgage to pay off your remaining mortgage debt.”
Your equity can be a game changer in reinvesting in your needs, pursuing your goals, and even helping you avoid foreclosure during difficult times. If you’re unsure how much equity you have in your home, connect with a local real estate professional so you can start planning your next move.
If you happen to’ve been maintaining with the information currently, you have in all probability come throughout headlines speaking in regards to the improve in foreclosures in at the moment’s housing market. This will have left you with some uncertainty, particularly if you happen to’re contemplating buying a home. It’s vital to know the context of those studies to know the reality about what’s occurring at the moment.
In line with a recent report from ATTOM, a property information supplier, foreclosures filings are up 2% in comparison with the earlier quarter and eight% since one yr in the past. Whereas media headlines are drawing consideration to this improve, reporting on simply the quantity may truly generate fear for concern that costs may crash. The fact is, whereas rising, the info exhibits a foreclosures disaster isn’t the place the market is headed.
Let’s have a look at the newest info with context so we are able to see how this compares to earlier years.
In recent times, the variety of foreclosures has been right down to document lows. That’s as a result of, in 2020 and 2021, the forbearance program and different reduction choices for householders helped hundreds of thousands of house owners keep of their properties, permitting them to get again on their ft throughout a really difficult interval. And with residence values rising on the identical time, many owners who might have discovered themselves dealing with foreclosures below different circumstances had been in a position to leverage their equity and promote their homes quite than face foreclosures. Shifting ahead, equity will proceed to be an element that may assist hold individuals from going into foreclosures.
As the federal government’s moratorium got here to an finish, there was an anticipated rise in foreclosures. However simply because foreclosures are up doesn’t imply the housing market is in hassle. As Clare Trapasso, Government Information Editor at Realtor.com, says:
“Many of those foreclosures would have occurred through the pandemic, however had been delay because of federal, state, and native foreclosures moratoriums designed to maintain individuals of their properties . . . Actual property specialists have pressured that this isn’t a repeat of the Nice Recession. It’s not that scores of house owners abruptly can’t afford their mortgage funds. Quite, many lenders are actually catching up. The foreclosures would have occurred through the pandemic if moratoriums hadn’t halted the proceedings.”
In a latest article, Bankrate additionally explains:
“Within the years after the housing crash, hundreds of thousands of foreclosures flooded the housing market, miserable costs. That’s not the case now. Most owners have a cushty fairness cushion of their properties. Lenders weren’t submitting default notices through the peak of the pandemic, pushing foreclosures to document lows in 2020. And whereas there was a slight uptick in foreclosures since then, it’s nothing prefer it was.”
Principally, there’s not a sudden flood of foreclosures coming. As an alternative, among the improve is because of the delayed exercise defined above whereas extra is from financial circumstances.
To additional paint the image of simply how totally different the scenario is now in comparison with the housing crash, check out the graph under. It makes use of information on foreclosures filings for the primary half of every yr since 2008 to indicate foreclosures exercise has been persistently decrease because the crash.
Whereas foreclosures are climbing, it’s clear foreclosures exercise now’s nothing prefer it was again then. Right this moment, foreclosures are far under the record-high quantity that was reported when the housing market crashed.
Along with all of the elements talked about above, that’s additionally largely as a result of patrons at the moment are extra certified and fewer prone to default on their loans.
Proper now, placing the info into context is extra vital than ever. Whereas the housing market is experiencing an anticipated rise in foreclosures, it’s nowhere close to the disaster ranges seen when the housing bubble burst, and that gained’t result in a crash in residence costs.
![Why You Can’t Compare Now to the ‘Unicorn’ Years of the Housing Market [INFOGRAPHIC] Simplifying The Market](https://daytonabeachpropertysearch.com/wp-content/uploads/2023/06/Why-You-Cant-Compare-Now-to-the-Unicorn-Years-of-the-Housing-Market-KCM-Share.png)
Evaluating actual property metrics from one 12 months to a different may be difficult in a traditional housing market. That’s because of potential variability available in the market making the comparability much less significant or correct. Unpredictable occasions can have a big affect on the circumstances and outcomes being in contrast.
Evaluating this 12 months’s numbers to the 2 ‘unicorn’ years we simply skilled is nearly nugatory. By ‘unicorn,’ that is the much less widespread definition of the phrase:
“One thing that’s enormously desired however troublesome or not possible to search out.”
The pandemic profoundly modified actual property over the previous couple of years. The demand for a house of our personal skyrocketed, and other people wanted a house workplace and massive yard.
It was a market that without end had been “enormously desired however troublesome or not possible to search out.” A ‘unicorn’ 12 months.
Now, issues are getting again to regular. The ‘unicorns’ have galloped off.
Evaluating at the moment’s market to these years is not sensible. Listed here are three examples:
In case you have a look at the headlines, you’d assume there aren’t any patrons on the market. We nonetheless promote over 10,000 homes a day in the USA. In fact, purchaser demand is down from the 2 ‘unicorn’ years. However, in line with ShowingTime, if we evaluate it to regular years (2017-2019), we are able to see that purchaser exercise continues to be sturdy (see graph beneath):
We are able to’t evaluate at the moment’s dwelling worth will increase to the final couple of years. In line with Freddie Mac, 2020 and 2021 every had historic appreciation numbers. Right here’s a graph additionally exhibiting the extra regular years (2017-2019):
We are able to see that we’re returning to extra regular dwelling worth will increase. There have been a number of months of minimal depreciation within the second half of 2022. Nevertheless, in line with Fannie Mae, the market has returned to extra regular appreciation within the first quarter of this 12 months.
There have already been some startling headlines in regards to the share will increase in foreclosures filings. In fact, the odds might be up. They’re will increase over traditionally low foreclosures charges. Right here’s a graph with data from ATTOM, a property information supplier:
There might be an increase over the numbers of the final three years now that the moratorium on foreclosures has ended. There are householders who lose their dwelling to foreclosures yearly, and it’s heartbreaking for these households. However, if we put the present numbers into perspective, we’ll notice that we’re truly going again to the conventional filings from 2017-2019.
There might be very unsettling headlines across the housing market this 12 months. Most will come from inappropriate comparisons to the ‘unicorn’ years. An actual property skilled is a good useful resource that can assist you preserve every part in correct perspective.
There has been concern recently that the housing market may be headed for a crash. Although, given the affordability challenges in the housing market and the recession talks in the media, the worry is understandable. However, the data clearly shows that today’s market is much different than it was before the housing crash in 2008. Here’s why:
Getting a home loan was much easier during the 2008 housing crisis than today, as lending standards were different which gave homeowners the opportunity to qualify for a home loan or refinance an existing one. This allowed lending institutions to take on a lot of risk in both the person and the mortgage product offered. Consequently, there were mass defaults, foreclosures, and falling prices. Currently, potential property purchasers face higher standards from mortgage firms.
While the pandemic resulted in a spike in unemployment over the last couple of years, the jobless rate has already recovered back to pre-pandemic levels. During the Great Recession, many people stayed unemployed for a more extended period, which was different from what occurred this time due to a swift job recovery. Considering that many people are employed today, there’s less risk of homeowners facing hardship and defaulting on loans. This helps put today’s housing market in good stead, and there’s a lower risk of more foreclosures coming onto the market.
During the housing crisis, there were many homes for sale (many of which were short sales and foreclosures), and that caused prices to fall dramatically. Today, there’s a shortage of inventory available overall, mainly due to years of underbuilding homes. The unsold inventory is at just a 2.6-months’ supply, and this time there just isn’t enough inventory on the market for home prices to come crashing down like they did in 2008.
The low inventory of homes available for sale helped keep upward pressure on home prices over the course of the pandemic. As a result, homeowners today have near-record amounts of equity, which puts them in a much stronger position compared to the Great Recession.
The graphs in the article indicate that today’s housing market is headed for a crash as there’s a shortage of inventory, homeowners have a lot of equity, and unemployment rates have returned to pre-pandemic levels. The current data clearly shows that today’s market is nothing like what occurred in 2008.
67% of Americans say a housing market crash is imminent in the next three years. With all the talk in the media lately about shifts in the housing market, it makes sense why so many people feel this way. But there’s good news. Current data shows today’s market is nothing like it was before the housing crash in 2008. Continue reading…
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