Understanding the Current Foreclosure Market

By Jenny Mateyoke

As your professional real estate advisor, I focus on client satisfaction. My business is about service and I am not happy until you are happy. My years in the business have provided me the experience to assist you with nearly every real estate need.

In this article, I want to address why a foreclosure wave isn’t on the horizon. Even though data shows inflation is cooling, many people are still feeling the pinch on their wallets. The high costs of everything from gas to groceries are fueling unnecessary concerns that more people will have trouble making their mortgage payments. But does that mean there’s a big wave of foreclosures coming? Here’s why the data and experts say that’s not going to happen.

Key Points:

1. Few Homeowners Seriously Behind on Mortgages: There aren’t many homeowners who are seriously behind on their mortgages. One of the main reasons there were so many foreclosures during the last housing crash was because relaxed lending standards made it easy for people to take out mortgages, even when they couldn’t show they’d be able to pay them back.

2. Stricter Lending Standards: At that time, lenders weren’t as strict when looking at applicant credit scores, income levels, employment status, and debt-to-income ratios. Since then, lending standards have tightened considerably. Lenders have become much more diligent when assessing applicants for home loans, resulting in more qualified buyers who are less likely to default on their loans.

3. Decline in Seriously Delinquent Mortgages: Data from Freddie Mac and Fannie Mae shows the number of homeowners who are seriously behind on their mortgage payments has been declining for quite some time.

4. Homeowners Using Equity to Avoid Foreclosure: Borrowers are not only more qualified, but they are also finding ways to navigate through their challenges, exploring their payment options, and perhaps even using the record amount of equity they have to sell and avoid foreclosure entirely.

5. Low Likelihood of a Foreclosure Wave: Before there can be a significant rise in foreclosures, the number of people who can’t make their mortgage payments would need to rise significantly. However, since so many buyers are making their payments today, and homeowners have so much equity built up, a wave of foreclosures isn’t likely.

6. Expert Opinion from Bill McBride: Bill McBride of Calculated Risk says we will not see a surge in foreclosures that would significantly impact home prices for two key reasons: mortgage lending has been solid, and most homeowners have substantial equity in their homes.

So, the bottom line is, if you’re worried about a potential foreclosure crisis, there’s nothing in the data to suggest that will happen. Buyers are more qualified now, and that’s one reason why they’re not falling seriously behind on their mortgage payments.

If you would like more information about the current real estate market, please reach out. I’m happy to help.