Are you feeling uncertain about buying a home due to headlines about rising foreclosures? You are not alone. However, rest assured that the data shows that there is not a foreclosure crisis in the housing market. It is important to understand what this means to have a clear understanding of current market trends. Let's take a closer look at the facts.
The Year-End 2022 U.S. Foreclosure Market Report from ATTOM reveals a 115% increase in foreclosure filings from last year, but a 34% decrease from 2019. While this may sound alarming, it's important to put this percentage into context.
In 2020 and 2021, the number of foreclosure filings hit record-low levels due to government programs such as forbearance options for homeowners. Thus, any increase in filings last year was expected. Market intelligence experts note that these programs and a healthy economy have helped to prevent millions of unnecessary foreclosures.
Moreover, current foreclosure levels are still far below the 2.9 million record-high reports from 2010. Homeowners facing financial difficulties have been able to leverage their home equity and sell their homes instead of facing foreclosure.
Overall, while there has been an increase in foreclosure filings, we need to remember the bigger picture and how these government programs have helped millions of struggling homeowners stay in their homes during challenging times.
Although foreclosures are increasing, it is important to keep things in perspective. According to Bill McBride, Founder and Author of Calculated Risk, there will be a rise in foreclosures over the next year, but not to the extent of the housing bubble. Unlike the past, there won't be a large wave of distressed sales causing cascading price declines. So, while foreclosures will go up, it won't have the same negative impact on prices. The importance of contextualizing data has never been greater. Although an anticipated increase in foreclosures has hit the housing market, it is far from the level of crisis during the housing bubble burst. Thus, there is no need to worry about a collapse in home prices.
The graph below reveals that foreclosures have dropped significantly since the housing market crash in 2010. In fact, current numbers are a far cry from the record high of 2.9 million.
