Are We About to See a Wave of Foreclosures? (Spoiler: NOPE!)
With the mortgage forbearance clauses of the CARS act winding down, it’s easy to wonder if housing values are going to collapse due to a flood of foreclosed properties much like it did in the month following the mortgage crisis of 2008.
Fortunately, there are some key factors that make these days unique from 2008:
These days, there are far fewer households in trouble when compared to the great recession.
Following the market crash of 2008, over nine million homes were lost to foreclosures and short sales. Current data shows that over eighty percent of homeowners left the COVID mortgage forbearance period either fully current on their payments or negotiated repayment plans through loan modifications or deferrals. Additionally, those homeowners who are till in mortgage forbearance still have options to negotiate repayment options. In short, there are far fewer households at risk today than we saw during the Great Recession.
Homeowner equity is at an all-time high.
In today’s market, we are experiencing record high home values and, as a result, record levels of homeowner equity in the properties. In contrast, a driving factor of the housing crisis of 2008 was a combination of properties being over-mortgaged with rapidly falling home values. So many homeowners found themselves in situations where the balance of their mortgages far exceeded the values of their homes, forcing them into situations where the only options were foreclosure or short sales. In today’s climate, homeowners have the equity in their homes to avoid distressed sales.
The Current Market Can Absorb Over 1 Million New Listings.
In 2008, the wave of foreclosures hit a market that was already saturated, stretching the available inventory out to nine months. As a result, home values continued to decline which exacerbated the market crisis. Traditionally, a balanced market will hold approximately a six month inventory while today, we are experiencing a low 2.1 month supply of inventory which is a major factor in driving home prices up. This current market can absorb over a million new listings before reaching that 6-month inventory mark and adversely affecting home values.
With the end of the COVID mortgage forbearance programs, we shouldn’t have to expect a flood of foreclosures that will affect home prices. While we are likely to not see the home value appreciation that we saw in 2021, we are continuing to see strong values driven by low inventory and attractive interest rates. The bottom line is that homeowners aren’t experiencing the foreclosure risk that occurred in 2008 and those who are in trouble have the equity in the properties to make a traditional sale. Finally, market demand still remains more than adequate to absorb whatever foreclosures that may occur.
WE CAN MAKE THE SALE OF YOUR CURRENT HOME 100% CONTINGENT ON YOU FINDING THE HOME OF YOUR DREAMS AND IF YOU DON’T FIND IT, YOU DON’T HAVE TO MOVE.
Let us streamline the process of maximizing the profits on your current home and get you into the home of your dreams! Our direct line is (714) 203-1669 or send an email to office@UltimatePropertiesSold.com.