It’s no secret that the cost of living has been steadily increasing over the past few years. This rise in costs, from groceries to gas, has caused concern that many people won’t be able to afford their mortgage payments and that foreclosures are on the horizon. While it’s true that foreclosure filings have gone up a bit compared to last year, experts say a flood of foreclosures isn’t coming. So, before you panic, let’s dive into the data and see what’s really going on.
The reason for the current rise in foreclosure filings is due to the backlog created by the pandemic. Many courts were closed, leading to a delay in processing foreclosure cases. However, this backlog is slowly being tackled, and the number of foreclosure filings is expected to decrease in the coming months.
Be advised by Calculated Risk‘s Bill McBride. McBride is a specialist in the housing market and was able to predict the foreclosures in 2008 after closely observing the data and market environment preceding the crash. He has a different outlook on what lies ahead in the current market with the same attentive eye and analysis:
“There will not be a foreclosure crisis this time.”
It’s also important to note that lending standards have tightened since the 2008 crash, making it more difficult for people to purchase homes they can’t afford. This has led to more qualified buyers who are more likely to make their mortgage payments on time. According to Freddie Mac and Fannie Mae, the number of homeowners who are seriously behind on their mortgage payments is declining (see graph below). This is great news for the housing market as it shows that people are able to afford their homes.
Molly Boese, Principal Economist at CoreLogic, explains just how few homeowners are struggling to make their mortgage payments:
“May’s overall mortgage delinquency rate matched the all-time low, and serious delinquencies followed suit. Furthermore, the rate of mortgages that were six months or more past due, a measure that ballooned in 2021, has receded to a level last observed in March 2020.”
Another contributing factor to the decrease in foreclosures is the government’s intervention. In response to the pandemic, the government implemented mortgage forbearance programs that allow homeowners to temporarily pause their mortgage payments. This has helped prevent foreclosures, and as the economy continues to recover, it’s expected that many of these homeowners will be able to resume making their payments.
Additionally, many banks and mortgage lenders are working with struggling homeowners to find solutions to prevent foreclosures. They are offering loan modifications, refinancing options, and payment plans to make it easier for people to stay in their homes. While foreclosures may still occur in some cases, it’s clear that there are many options available to help people keep their homes.
While the rising cost of living is a concern, the good news is that a flood of foreclosures isn’t on the horizon. With tighter lending standards, government intervention, and assistance from banks and mortgage lenders, there are many options available to help people keep their homes. So, before you panic, take a deep breath and know that there are measures in place to support homeowners during this difficult time.
