Foreclosure Trends: Below the Historical Average

You may have noticed alarming headlines lately, alluding to a surge in foreclosures in today's housing market. Such headlines can undoubtedly instill fear and uncertainty about what lies ahead. However, it's important to take these sensationalized titles with a grain of salt, as they often fail to provide the full context.

To truly understand the current foreclosure landscape, one must consider the bigger picture and how today's numbers compare to historical norms.

Putting the Headlines into Perspective

The media's portrayal of a foreclosure spike can be misleading. Often, these reports juxtapose the latest figures with a period in which foreclosures hit historic lows. This selective comparison can create the illusion of a crisis when, in reality, the situation is far less dire.

In 2020 and 2021, the implementation of moratoriums and forbearance programs played a crucial role in helping millions of homeowners retain their properties, affording them the time needed to regain financial stability during an unprecedentedly challenging period.

With the conclusion of these protective measures, an uptick in foreclosures was entirely expected. However, it's crucial to clarify that an increase in foreclosure rates does not inherently signal a housing market in turmoil.

Historical Data: No Wave of Foreclosures in Sight

Rather than benchmarking today's statistics against the atypical past few years, it is more instructive to compare them to long-term trends, particularly the housing market crash of 2008, as it is the event that many fear could repeat.

Refer to the chart above, which utilizes foreclosure data from ATTOM, a property data provider. It illustrates that foreclosure activity has consistently remained lower (as indicated in orange) since the 2008 crash (depicted in red):

The figures make it evident that today's foreclosure situation bears little resemblance to the crisis of the past. In fact, we have not even reached the levels seen in more typical years like 2019. As Rick Sharga, Founder and CEO of the CJ Patrick Company, underscores:

"Foreclosure activity remains at approximately 60% of pre-pandemic levels..."

This is primarily attributed to the fact that today's homebuyers are generally more financially qualified and less likely to default on their mortgage loans. Delinquency rates continue to be low, and most homeowners possess sufficient equity to shield them from foreclosure. Molly Boesel, Principal Economist at CoreLogic, corroborates this viewpoint:

"U.S. mortgage delinquency rates remained healthy in October, with the overall delinquency rate unchanged from a year earlier and the serious delinquency rate remaining at a historic low... Borrowers in later stages of delinquencies are finding alternatives to defaulting on their home loans."

In conclusion, while foreclosure filings may be on the rise, it's imperative to acknowledge that today's housing market is nowhere near the dire circumstances witnessed during the bursting of the housing bubble.

Despite the anticipated uptick in foreclosures, the data unequivocally refutes the notion of a foreclosure crisis looming over the housing market. If you find yourself perplexed or concerned about the information circulating regarding the real estate market, don't hesitate to reach out.