Okay, so you've been seeing all these headlines about foreclosures taking over the housing market, making you want to run for the hills and never buy a home again. Fear not, dear reader, because it's time to separate the truth from the media's drama!
Here's the skinny on the situation: according to the Year-End 2022 U.S. Foreclosure Market Report from ATTOM, foreclosure writings have gone up 115% from 2021. Now, before you start stocking up on canned goods and preparing for a housing market apocalypse, let's put that 115% into perspective.
Remember, the forbearance program and other homeowner relief options helped bring foreclosure writings to record-low levels in 2020 and 2021. So, when the data showed an increase last year, it's actually just a jump up from those record lows. Executive VP of Market Intelligence at ATTOM, Rick Sharga, puts it perfectly:
"Eighteen months after the end of the government’s foreclosure moratorium, and with less than five percent of the 8.4 million borrowers who entered the CARES Act forbearance program remaining, foreclosure activity remains significantly lower than it was prior to the COVID-19 pandemic. It seems clear that government and mortgage industry efforts during the pandemic, coupled with a strong economy, have helped prevent millions of unnecessary foreclosures."
And let's not forget, home values have been rising too, which has allowed homeowners to sell their homes instead of facing foreclosure. Plus, the graph below shows that foreclosures today are far, far away from the record-high 2.9 million that were reported in 2010 when the housing market took a dive.
Bill McBride, Founder and Author of Calculated Risk, sums it up perfectly:
“The bottom line is there will be an increase in foreclosures over the next year (from record low levels), but there will not be a huge wave of distressed sales as happened following the housing bubble. The distressed sales during the housing bust led to cascading price declines, and that will not happen this time.”
In conclusion, don't let the headlines scare you! While there may be an expected rise in foreclosures, it's nowhere near the crisis levels seen in the past, and won't lead to a crash in home prices. So, relax, take a deep breath, and go ahead and buy that dream home you've been eyeing.